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Sellers are back in control of Toronto region’s housing market

The Toronto region’s housing market moved back into seller’s territory in September with new listings declining and home sales continuing at a rapid pace.

Resale listings had been on the upswing for four consecutive months, but fell by nearly 16 percent overall in September. This caused the important market barometer — the sales-to-new-listings ratio — to reach 65.8 percent in the region, indicating the reemergence of a seller’s market. In August, the Toronto housing market had been in ‘balanced’ territory, with a sales-to-new-listings ratio of 52.6 percent.

As Diana Petramala and Victoria Colantonio, researchers at Ryerson University’s Centre for Urban Research (CUR), pointed out, the increase to the ratio means sellers now hold more of the bargaining power in the Toronto region’s market.

“As such, the MLS average sales price [in the GTA] was up 14 percent year-over-year. The price of all types of housing rose at this rate, with the exception of condos,” they wrote in a research brief published last week.

The researchers were alluding to the fact that the overall shift to seller’s market conditions was driven primarily by skyrocketing demand for detached homes and other ground-related property types brought on by the pandemic. Condos are the one segment where buyers likely still hold the upper hand, especially in the City of Toronto and its downtown core.

Active listings for condos in the City of Toronto reached a record high in September, with enough listings currently available to satisfy three and a half months worth of buyer demand, Petramala and Colantonio wrote.

This helps explain how the Toronto region’s suburban areas saw a relatively modest 21 percent increase in new listings in September, while the City of Toronto, where condos figure more heavily into the market composition, saw a 50 percent increase.

“[T]he condo market has lost favour among homebuyers. While prices are still rising in the condo market, they could change direction if listings continue to rise as they have been in the last seven months,” the CUR researchers wrote.

Some have speculated that investor-owners attempting to offload their former Airbnb units or long-term rentals on the resale market are behind the new condo listings surge, but Capital Economics’ Stephen Brown said in commentary published last week that other factors are likely at play.

Wilted Flowere suspect the far bigger factor is that there has been a huge shift in demand among owner-occupiers. Specifically, due to health concerns and increased working from home, many people are trying to sell apartments and purchase more spacious single-family homes,” wrote Brown.

Petramala and Colantonio expressed a similar view, writing that low mortgage rates and Millennials are driving demand for ground-related housing outside of the city-proper.

Canadian real estate fundamentals
 
Last week was the Vancouver Real Estate Forum. Benjamin Tal (chief economist at CIBC) opened things up, as he usually does, and he was pretty candid about what might be coming this winter. Here is an excerpt from a recent Globe and Mail article summarizing the event:

“It’s reasonable to assume that the next six months will not be very pretty,” said Mr. Tal. “The honeymoon of the summer is basically over. Now we enter the winter months, and I think the next few months will be much more difficult. We will have a situation where we will clearly see a second wave, and it’s already starting. This second wave will overlap with the flu season, so everybody will be very confused. The fear factor will rise, and that’s something we have to take into account when we look at the trajectory of the economy.”

Indeed, today kind of feels like the official start of the second wave. Here in Toronto, indoor dining, gyms, and a bunch of other things were just shut down for the next 28 days.

But I think the more important takeaway from the article is this one here: the fundamentals around Canadian real estate remain incredibly strong. Another excerpt:

“Let’s visit the market in 2023: I suggest the market will show the same trend we have seen in as 2019. This is a pause, but the fundamentals of the real estate market in Canada are so strong that the demand factor will continue to be there and supply will be limited. I suggest that after a two- to three-year period of some sort of softness, despite the V-shaped recovery that we are seeing, I see continuation of the trend.”

As I’ve said before on the blog, it’s easy to get caught up in shorter-term and ephemeral headlines. But if one can look through some of that to the other side of this health crisis, I think we would all be in a position to make better decisions.

As a general rule, I don’t like making long-term real estate decisions based on what is expected to take place in the next 6 months.
Google Announces Massive New 400,000 Square Foot Office in Toronto

 

Google continues to expand its footprint on Canadian soil with the expansion of three massive new offices, two of which will be in Ontario and a third in Quebec.

Our fine city will be home to one of the province’s new spaces, setting up shop on King Street East, while the other two offices will open in Waterloo and Montreal.

This comes nineteen years after Google opened the doors to its first office in Toronto, which only had one salesperson at the time. Today, the tech giant employs over 1,500 people across its current Canadian offices, including engineers, sales leaders, and AI researchers.

When the three new offices are finished being built in 2022, Google says its Canadian offices will accommodate up to 5,000 employees.

 

The new Toronto digs will be located at 65 King East, occupying 400,000-sq.ft of office space across 18 floors in the city’s newest, “next-generation” office development.

“We are extremely pleased to announce that 100% of the office floors of 65 King East are now leased to Google: one of the most prominent, influential and well-recognized companies in the world,” said Dean Cutting, a partner of Carttera, a Canadian real estate investment fund manager and developer.

“Our vision for 65 King East has always been to combine innovative office architecture and an employee-centric workplace design with a dynamic, forward-thinking organization. Google truly recognizes how 65 King East promotes sustainability, employee wellness, collaboration, productivity and health,” said Cutting.

“The fact that Google made a long-term commitment to our project is a testament that we are leading the future of innovative office design. We look forward to a long-term collaborative relationship with Google for many years to come.”

With proximity to the TTC and Union Station, the King East office building will also feature over 18,000-sq.ft of outdoor terraces, 196 bike stalls, and 10,675-sq.ft of retail space, while also incorporating smart building technologies and sustainability. With Wired Score Gold already accomplished, 65 King East has been designed to achieve LEED Gold certification, according to Carterra.

Detached home prices just rose over 20% in 10 Toronto suburbs

September was another banner month for the Toronto region’s housing market and no property type was hotter than detached homes in the suburban areas surrounding the city.

Of the 30 suburban regions tracked by the Toronto Regional Real Estate Board, 10 saw detached home prices climb by over 20 percent last month compared to September 2019.

Scugog, Adjala-Tosorontio, Uxbridge, Bradford-West Gwillimbury and Clarington made up the top five Toronto region suburbs that saw the largest percentage increases in their detached home segments.

At the top of the list, the average detached home in Scugog, a township northeast of Toronto, skyrocketed 37.2 percent to $870,078 in September. Detached homes in Adjala-Tosorontio also saw a 30.5 percent price increase from the previous year, rising to $895,480. The suburbs that rounded out the top five all recorded price increases in the 25 percent range over September 2019.

The other suburbs that saw 20-percent-plus price increases for detached homes were Georgina, Innisfil, Milton, Whitchurch-Stouffville and Whitby.

“Low mortgage rates, in combination with Millennial demand, is driving demand for ground-related housing. As homebuyers search for affordable ground-related housing, they are looking beyond the 416 boundaries,” wrote Diana Petramala and Victoria Colantonio, researchers at Ryerson University’s Centre for Urban Research (CUR).

In a recent research note titled “September TRREB data show 905 region leaving the 416 area in the dust,” Petramala and Colantonio wrote that the strength seen in last month’s sales and price figures went beyond pent-up demand accumulated through the March to May period.

The CUR researchers pointed out that new listings were actually rising faster in the 416, or City of Toronto, despite sales activity being more concentrated in the suburban 905 areas. But with the pace of sales more than offsetting the weakness in the city’s core condo market, the overall regional market was firmly in seller’s territory, with home seller’s holding more bargaining power, Petramala and Colantonio said.

This means there’s insufficient supply in the form of new and active listings to meet buyer demand, pushing home prices higher in suburban areas that are now more coveted than ever. 

Percentage of young Americans now living with a parent

Here’s some data from the Pew Research Center looking at the percentage of young people (18- to 29-year olds) in the US that live with at least one parent. It it based on an analysis of monthly Census Bureau data and is obviously interesting/relevant given that this pandemic seems to have precipitated a number of people moving back home. As of July of this year, 52% of young adults were thought to be living with at least one parent, which is up from 47% back in February.

 

At first I was surprised to see these numbers as high as they are. But it’s really the 18-24 age bracket that is driving this number up, which makes sense given that a chunk of this demographic is probably in school, not working, and now unable to do much on a campus. Among 25- to 29-year olds, the range is significantly lower, with just over a quarter (26% -> 28%) living with their parent(s).

What I’m curious about now, after seeing this chart, is what is driving some of these regional, ethnic, and gender differences? Why are young midwesterners seemingly less likely to live with a parent compared to those in the northeast? Is it cultural? Economic? Or something else? And is the above an indication that maybe women are more independent than men?

Single-family home prices kept accelerating across Canada in September: RBC

 

Home sales in major markets across the country delivered more impressive increases in September as activity continued to rebound from the lows seen in April and May.

Market data published over the last week by local real estate boards saw trends first observed in the early summer remain fairly uniform across the country, especially the ongoing divergence of low-rise home sales and prices and activity seen in the condo segment.

Commenting on the latest set of data to emerge from Canada’s major housing markets in the pandemic era, RBC Senior Economist Robert Hogue noted that demand for single-detached and other low-rise homes appeared “universally stronger” when compared to condos.

“The pandemic is altering the housing needs of many current owners, which simultaneously shifts demand from condo apartments to single-detached homes and other low-rise categories, and boosts the supply of smaller condos in core urban areas. These trends have put single-family home prices on accelerating trajectories,” Hogue wrote.

Average condo prices have remained on a much less impressive upward trajectory during the course of the pandemic thus far, but Hogue doesn’t believe this will last. With buyers looking elsewhere and new listings steadily rising, the economist said that condo prices will lose ground in 2021 in some of the country’s major urban markets.

Zeroing in on Toronto, Hogue pointed to September’s 90 percent year-over-year increase in new condo listings as a sign that demand-supply conditions were softening for the segment. Meantime, the Toronto region’s MLS Home Price Index hit a three-year high growth rate of 11.6 percent over September 2019’s reading, with the “heat,” as Hogue put it, concentrated in the market’s low-rise segments.

Detached home prices also accelerated in Vancouver, up 7.8 percent in September on an annual basis compared to the 6.9 percent increase recorded in August. Home sales increased 77 percent over the previous year, while new listings rose 18 percent.

The divergence of supply and demand in the detached and condo segments was not as pronounced as what was observed in Toronto, but Hogue believes it will still impact prices for both housing types. New condo listings rose faster than sales, with the former recording a 44 percent increase over the previous year and the latter logging a 37 percent rise. This meant condo prices rose a calmer 4.5 percent annually.

“We expect prices to heat up even more in [the detached home] segment in the near term. We expect more plentiful inventories will do the opposite for condo prices,” Hogue wrote.

Sales and listings continue to rise as Toronto real estate market outperformed by suburbs

The Toronto real estate market continued its brisk pace in September setting a new record for the number of sales for the month at 11,083, according to the latest market statistics from the Toronto Regional Real Estate Board (TRREB).

Although 2019 was a good year for Toronto real estate, and despite a major slowdown caused by the COVID-19 pandemic, all losses appear to have been recouped as the first nine months of 2020 are now up approximately one per cent when compared to the same period in 2019. 

“Improving economic conditions and extremely low borrowing costs sustained record-level sales in September, as we continued to account for the substantial amount of pent-up demand that resulted from the spring downturn,” said Lisa Patel, president of TRREB. “Further improvements in the economy, including job growth, would support strong home sales moving forward. However, it will be important to monitor the trajectory of COVID-19 cases, the related government policy response, and the impact on jobs and consumer confidence.”

Market activity in September also resulted in considerable price appreciation especially in the low-rise sector of the market with average selling price for all home types up 14 per cent from last September. Condo prices continued to grow, but at a slower pace. 

Other important indicators show that active listings continue to rise and now sit at more than 18,000 throughout the region, up from 16,662 in August. Month-to-month average price of detached and semi-detached homes dropped from August to September, while prices for townhomes and condos increased. 

“On a GTA-wide basis, market conditions tightened in September relative to last year, with sales increasing at a faster pace than new listings,” said Jason Mercer, TRREB’s chief market analyst. “With competition between buyers increasing noticeably, double-digit year-over-year price growth was commonplace throughout the region in September, resulting in the overall average selling price reaching a new record.”

Toronto home prices increases were eclipsed by other regions almost across the entire board with Halton and Durham regions showing the highest rate of price growth. The average price growth in the entire 905 region was 16.9 per cent while the city of Toronto was under 10 per cent. 

Toronto Sets New Record for Home Transactions in September as Sales Soared 42%

Summer may have drawn to a close but the Toronto real estate market remained hot well into the start of the new season, with September being a record-breaking month for home sales in Canada’s largest city.

According to the Toronto Regional Real Estate Board (TRREB), it was the best September on record for home sales in the Toronto-area, with 42.3% more sales closing last month than in September of last year.

Important to note, even amid a global pandemic that saw the economy come to a near halt and COVID-19 lockdowns prevented home showings, sales through the first nine months of 2020 still managed to be up by 1% compared to the same period in 2019.

TRREB says 11,083 existing homes were sold in the Toronto-area in September, at an average price of $960,772 — up by 14% year-over-year.

TRREB President, Lisa Patel, says improved economic conditions and “extremely” low borrowing costs helped sustain September’s record-breaking levels, as did built-up demand left over from the disrupted spring season.

“Further improvements in the economy, including job growth, would support strong home sales moving forward. However, it will be important to monitor the trajectory of COVID-19 cases, the related government policy response, and the impact on jobs and consumer confidence,” said Ms. Patel.

Year-over-year sales growth in September continued to be driven by ground-oriented market segments, including detached and semi-detached houses and townhouses. Annual growth rates were also higher for sales reported in the GTA regions surrounding the City of Toronto.

Here in Toronto, the number of new listings (8,689) and the number of sales (3,555) at the end of September were both up on a year-over-year basis. While new listings were up strongly for all home types, growth in sales of new condominium apartments (1,549) outstripped growth in the city’s other market segments.

But it’s not just sales and listings that soared in September, as the average selling price of all home categories in the 416 — low-rise market segments and condos included — rose last month to $1,022,051, up $9,545 from August’s average.

The September numbers also showed that those looking to enter the housing market are turning to buy more ground-level homes, as detached houses in Toronto sold for $1,487,122 on average, a 9.4% increase compared to last September. What’s more, the 1,161 detached house transactions in Toronto last month represented a 28.1% year-over-year increase, while the 421 semi-detached home sales showed a 48.8% increase from last September.

While condo sales rose 7% year-over-year in Toronto in September, the 905 regions saw the biggest jump in condo transactions with a 32.1% increase. Condo prices also rose more notably in the 905-area, up 8% to $537,354 compared to 7.7% and $686,191 in Toronto.

“On a GTA-wide basis, market conditions tightened in September relative to last year, with sales increasing at a faster pace than new listings,” said Jason Mercer, TRREB’s Chief Market Analyst. “With competition between buyers increasing noticeably, double-digit year-over-year price growth was commonplace throughout the region in September, resulting in the overall average selling price reaching a new record.”

TRREB CEO John DiMichele says the housing market recovery experienced throughout the summer benefitted the broader economy as well.

“Home sales reported through TRREB’s MLS System result in billions of dollars in spin-off expenditures, support for tens of thousands of jobs, and billions of dollars in taxes paid to all levels of government. The demand for housing and the related economic impacts will continue in the post-COVID period as population growth resumes. Policymakers will need to continue their efforts to bring more housing supply on line to meet this longer-term demand,” added DiMichele.

Toronto’s housing market just broke September sales record

 

Toronto’s housing market continued on a tear in September, breaking the record for homes sold in the month and exceeding 11,000 total transactions for the second time in three months.

The 11,083 homes that changed hands in the region last month also meant that September was the third consecutive month that the Toronto market broke a sales volume record since the pandemic recovery began.

The sales total was up 42.3 percent over the previous year and the performance was enough to push 2020’s home sales to date past the same nine-month period in 2019. According to the Toronto Regional Real Estate Board (TRREB), which released the data today, sales through the first nine months of 2020 were up one percent compared to the previous year.

It’s a headline figure that surely would have surprised many watching the market in April and May, when sales were down 67 percent and 53.7 percent on an annual basis, respectively.

Despite the swift market recovery, TRREB President Lisa Patel was careful not to provide an overly optimistic outlook for the remainder of the year as the pandemic wears on and cases of COVID-19 rise in the region.

“Improving economic conditions and extremely low borrowing costs sustained record-level sales in September, as we continued to account for the substantial amount of pent-up demand that resulted from the spring downturn,” said Patel.

“Further improvements in the economy, including job growth, would support strong home sales moving forward. However, it will be important to monitor the trajectory of COVID-19 cases, the related government policy response, and the impact on jobs and consumer confidence,” she continued.

As has been the case since the market recovery began, the detached, semi-detached and townhome segments were the primary drivers of annual sales growth. While the condo segment has seen solid year-over-year growth, the 14.6 percent annual increase lags far behind the 54.7 percent increase seen in the GTA detached home segment.

On the pricing front, the MLS index price for the Toronto region was up 11.6 percent over September 2019. The average sale price across all property types was $960,772, up 14 percent over the previous year and a new record for the region. Like sales volume, it was the low-rise segment that was responsible for the majority of the price growth momentum.

“On a GTA-wide basis, market conditions tightened in September relative to last year, with sales increasing at a faster pace than new listings,” said TRREB Chief Market Analyst Jason Mercer.

“With competition between buyers increasing noticeably, double-digit year-over-year price growth was commonplace throughout the region in September, resulting in the overall average selling price reaching a new record,” he added.

Toronto-Area Apartment Prices Have Risen Nearly 80% in the Last 5 Years

 

Fact: living in Toronto is expensive. Exactly how expensive depends on where you live in the city and what you live in — obviously. But new data from shows just how much prices for apartments and single-family homes have fluctuated over the past five years and it’s safe to say, prices have definitely gone up.

In a new report, looked at whether home prices have grown or contracted in 15 Canadian markets compared to 5 years ago by reviewing benchmark prices for apartments and single-family houses with data from the Canadian Real Estate Association (CREA) from August 2020 and August 2015.

In analysis, benchmark apartment prices rose over 50% in 7 of 15 markets over the past 5 years — the majority of which were in Southern Ontario. However, Fraser Valley, BC saw the highest 5-year increase overall, with prices rising 104%. What’s more, 7 out of 15 markets included in the analysis also noted a 50% or higher increase in the benchmark price for single-family houses, with the Niagara Region leading the pack.

On a local level, prices in Toronto have seen substantial increases, with apartment prices rising 78%, bringing the average price in 2020 to $592,900. Prices for single-family homes in the area rose by 51% to reach an average of $999,200.

Across the region, Niagara led price growth in the area for apartments, with the benchmark price growing 87% to $354,400. This was followed by Toronto, then Hamilton-Burlington, where the price rose 74% to $471,100, and finally Guelph, where there was a 73% increase in the benchmark apartment price bringing the 2020 average to $379,000.

As for single-family homes in the analysis, the Niagara Region experienced the highest growth — the price almost doubled — with an impressive 95% increase in 5 years to reach $490,500 in 2020. This was followed by Hamilton-Burlington with a 71% increase, Guelph with 63%, Fraser Valley with 62%, Ottawa with 53%, and Victoria with 50%.

Furthermore, the analysis revealed that Prairie markets (Calgary, Edmonton, Regina, Saskatoon, and Winnipeg) are some of the few regions where the benchmark apartment and single-family house is more affordable today than it was 5 years ago.

analysis follows national home sales and listings continuing to climb in August, as some of the pressure from pent-up demand was released this summer when pandemic restrictions eased. In turn, buyers continued returning to the market with refocused housing priorities — with a growing number beginning to look to suburban and rural markets in search of more space relative to what’s available in denser urban cities.

However, despite the surge in demand, the Canada Housing and Mortgage Corporation (CMHC) recently reiterated their forecast that home prices are likely to dip by as much as 18% in the coming months — citing pandemic-induced unemployment and slower in-bound migration weighing on demand, particularly in metropolitan cities like Toronto and Vancouver. In turn, RE/MAX called CMHC’s prediction “fear-mongering.”

Toronto’s Luxury Real Estate Market Remains ‘Resilient’ Amid Pandemic

 

If one thing’s for certain, the Toronto luxury real estate market has remained resilient in the face of the global pandemic.

And while Ontario braces itself for the already-in-motion second wave of the novel coronavirus, according to Royal LePage, there are currently interesting buying opportunities in the Toronto and Greater Toronto Area (GTA) luxury condo market, as buyers seek larger homes to live and work in the pandemic.

This week, Royal LePage released its Luxury Property Report, which includes insights regarding luxury properties — which are defined as having a value above three times the median price of a house or condominium in its region — specifically for the Toronto and GTA region.

According to the report, from March 15 to September 9, the price of a luxury condo in Toronto dipped by 1.6% year-over-year to $1,870,000, while in the GTA, the price fell by 3.6% year-over-year to $1,830,000.

Luxury houses in the city, on the other hand, saw gains of 5.4% to a median price of $3,187,500. In the GTA, luxury house prices increased by 5.9% to $ 3,177,500.

Cailey Heaps, managing director and sales representative, Royal LePage Real Estate Services, says demand for luxury properties in Toronto has been driven by low inventory, low-interest rates, and a “renewed focus on lifestyle to accommodate for our new normal.”

Heaps added that buyers seeking luxury property are focused on lifestyle when looking for their perfect home.

“With travel off the table for the near future and many working from home, features such as a home office, outdoor space, a pool and walkability are becoming increasingly important in their search criteria,” said Heaps.

“Appropriately priced homes in the established Central Toronto neighbourhoods such as Rosedale, Leaside, and Lawrence Park often sell in a matter of days. Multiple offer situations still occur but to a lesser degree than in the pre-COVID landscape, giving buyers an opportunity to purchase in a slightly less competitive market.”

While the luxury condominium market has faced some challenges over the recent months, Heaps says the new rules with respect to short-term rentals, higher inventory, and the increased risk that comes with communal spaces or common areas have meant that condos did not perform as well as the freehold market. However, she says buyers will find more selection compared to the inventory of luxury houses.

Heaps noted that while all luxury buyer demographics are still active, boomers are quieter this year than previous years. However, many cautious boomers selling their luxury home have the opportunity to stay at their cottage or a secondary property as an additional option during the pandemic.

Looking towards the remainder of the year, Heaps noted that current demand is slowing, which is typical of fourth-quarter activity.

On a national level, the median price of a luxury house increased 1% year-over-year to $2,500,000, while the median price of a luxury condominium remained constant at $1,250,000.

Royal LePage says recent steep increases in overall Canadian home prices have pushed more properties over the national lower price threshold, increasing the overall quantity of Canadian homes defined as luxury properties.

Why some Canadians have only 5-7 months before their home buying window closes

 

In light of the past six months of COVID-19-triggered uncertainty, home sales in Canada have been shockingly brisk as a combination of FOMO and low interest rates keep drawing buyers into the market. The feeding frenzy won’t last – plenty of organizations are expecting a major correction in the coming months – but waiting until it passes may not be the best course of action according to one mortgage insider.

In his recent dealings with clients seeking preapprovals, Alex Leduc, who does double duty as both Mortguage’s principal broker and its CEO, came to notice what could be a chilling trend for Canadians with variable incomes. Faced with earning a significantly lower income in 2020 because of pandemic-related busines disruption, this particular cohort of prospective buyers – hourly wage earners, the self-employed, anyone whose income depends heavily on bonuses or commissions – could see their buying power plummet – until 2023.

“It’s not necessarily just homebuyers,” Leduc says. “It would be anybody who is buying, or even potentially switching mortgages, who has a variable form of income that would be effected.”

When lenders evaluate borrowers with variable incomes, Leduc explains, they look at notices of assessment, T4s, and T1s for the two most recent years and calculate the average between them. The lesser of the two-year average and the most current year’s income becomes a person’s qualifying income. Anyone buying in 2020 will use 2018 and 2019’s records – no problem there – but buyers who wait until 2021 will be evaluated using 2020 income levels. For a significant portion of the population that experienced a disruption in income this year, that means less buying power.

“As of now, lenders are not going to use your 2020 NOA or T4 because you don’t have it yet. But once you have it, you have to use it,” Leduc says.

In a recent blog post, Leduc provided an example that highlights the potential problem: A buyer earned $96,000 in 2018 and 2019, meaning her two-year average qualifying income this year is also $96,000. But if her 2020 income falls to $80,000, much lower than the two-year 2019-20 average of $88,000, that becomes her qualifying income for 2021. Leduc calculates that this borrower would see a 16 percent reduction, equivalent to around $74,000, in purchasing power.

Because lenders require two years’ worth of records, the problem will persist until borrowers get their hands on 2022’s financial docs. In 2022, borrowers will still be hampered by their 2020 earnings. It won’t be until 2023, when 2021’s and 2022’s earnings are taken into consideration, when these buyers might see their buying power return to today’s levels.

“It really does have a significant impact,” Leduc says.

With 2020 being the nightmare it is, some may wonder if lenders will adjust their metrics and attribute any loss in income to the pandemic rather than to borrowers themselves. Leduc doesn’t currently see much of an appetite for such changes among lenders.

“Some lenders are pretty cut-throat about it. A lot of them don’t sway from policy,” he says. “No one’s come out and said, ‘We’re going to make policy changes or exceptions to this.’ It’s really business as usual.”

He does, however, see a scenario where, if an abundance of Canadians see their buying power evaporate next year, lenders feel pressured to change their income calculations. If that happens, he says, they could decide, when looking at 2019-20 or 2020-21 earnings, to use whichever is higher to determine qualifying income. They could also potentially look at the past three years and use the two highest incomes to calculate an average.

Leduc insists that he’s not trying to generate panic. Plenty of Canadians with variable earnings will still be able to qualify next year and the year after. That’s why it’s important for them to sit down with their mortgage brokers now and start running a few possible scenarios. Leduc says he is working with his clients to ensure they understand the situation and can set reasonable expectations.

With a potential price correction on the way, buyers may feel safe waiting, thinking that even if their income for 2020 falls, a mini housing crash may help compensate for a shortfall in qualifying income.

That’s not a strategy Leduc encourages. Pointing to the example of the buyer whose purchasing power fell 16 percent, he says, “Even if we had price decreases, I don’t think it would be to the extent of 16 percent within a year. That would be pretty aggressive, I think.”

Sales of New Homes in GTA up 217% in August: BILD

 

The last few weeks of summer was an “unusually” busy time for the Greater Toronto Area (GTA) new home market, as over 4,500 new homes were sold, according to the Building Industry and Land Development Association (BILD).

On Monday, BILD announced that a total of 4,539 new homes sold last month, up 217% from August of last year and 119% above the 10-year average, according to Altus Group, BILD’s official source for new home market intelligence. This also marked the highest number of new home sales for August since Altus Group started tracking in 2000.

During the same time, sales of single-family homes, which include detached, linked, and semi-detached houses and townhouses (excluding stacked townhouses), with 1,930 units sold, were up 355% from last August and 139% above the 10-year average.

What’s more, condominium apartments, including units in low, medium and high-rise buildings, stacked townhouses and loft units, accounted for 2,609 new home sales, were up 159% from August 2019 and 106% above the 10-year average.

When breaking it down by municipality, Toronto had the highest number of new condominium apartment sales, with 1,423 transactions in August. Halton followed behind with 483, while York had 365 sales, York had 365, and Durham had 163.

“With the record sales activity and unusual number of project launches we saw in August, it is becoming clear that the COVID-19 pandemic delayed consumers’ housing purchase decisions as well as builders’ project openings,” said Ryan Wyse, Altus Group’s Manager, Analytics, Data Solutions.

“After the normally busy spring months were severely affected by the pandemic and related government-imposed restrictions, we saw much stronger activity than normal during the summer.”

The total number of new homes remaining in inventory in August was 14,331 units, which includes units in preconstruction projects, in projects currently under construction, and in completed buildings.

What’s more, BILD says while the benchmark price for both single-family homes and condominium apartments dipped slightly in August compared to the previous month, it was still up year-over-year. The benchmark price for new condo apartments in August was $972,859, up 15.7% over the last 12 months, while the benchmark price for new single-family homes was $1,169,823, up 8% over the last 12 months.

David Wilkes, BILD President and CEO says while the GTA housing market had a “strong” summer, with the resurgence in COVID-19 cases, the coming months are full of uncertainty. “What is certain is that residential and non-residential construction has played a key role in kick-starting the economy in our region and in Canada, and will continue to do so.”

Wilkes added that BILD is working with all levels of government to remove barriers to building and economic recovery.

Canadian immigration rebounds

Population growth — so, immigration — is a crucial demand driver for the real estate industry, and for the growth of the overall Canadian economy. Last year, Canadian immigration averaged about 28,400 people per month, according to a recent equity research report (on the apartment sector) by TD Bank. The total number for 2019 was 341,175 people.

Not surprisingly, this number fell off in March of this year with the closing of our borders. In March, immigration declined to 18,560 per month and bottomed out in April with only 4,135 immigrants being admitted to the country. This has no doubt been a factor in some of the rent softening that we have seen in the multi-family space.

 

 

While it’s unlikely that Canada will meet its 2020 target of 320,000 to 370,000 new immigrants, it’s important to note that we have seen a fairly swift recovery (see above). In June of this year, the number rebounded to 19,175 new immigrants. And I’m certain that most of this cohort still went straight toward our biggest cities.

It’s also important to keep in mind that Canada’s three-year goal (2020-2022) remains 1 million new immigrants. TD is of the opinion that this target is still attainable, as this “short-term immigration headwind” is likely to flip into a tailwind once our borders become more porous and we get to the other side of this pandemic.

I think it’s pretty safe to say that you could bucket this immigration blip into (1) short-term dislocation. It is not a (3) long-term structural change. Canada remains one of the greatest countries in the world. We will continue to attract smart and ambitious people from all around the world, and most will want to settle in our urban centers.

All of this, of course, will be good for the real estate industry and will be vital to the strength of the Canadian economy as a whole.

Chart: TD Securities

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