New data suggests homes sales in Toronto dropped 37% last week compared to the same time last year, according to Realosophy Realty.
The firm also says cancelled listings jumped by 27% as thousands of Canadians now find themselves out of work, putting into question the near-term future of Canada’s real estate market.
“The market has definitely hit the brakes,” John Pasalis, president of Realosophy Realty, toldBNN Bloomberg. While home prices are expected to remain stable in the near-term as both buyers and sellers retreat from the market, Pasalis says the composite benchmark price is expected to fall 2.9% in the second half of this year.
“In a matter of weeks or months, surging unemployment and the market’s illiquidity will compel a growing number of tight-squeezed sellers to make price concessions.”
Realosophy’s data shows even steeper declines in certain regions, particularly where investment buying may be higher, including a 61% decline in resale home transactions in Richmond Hill, and a 46% decline in Markham.
“Canada’s housing market will slow to a crawl this spring as Canadians follow social distancing orders in order to combat the spread of COVID-19,” added RBC analyst Robert Hogue in a recent newsletter. “We think the recovery will come in stages—taking buyers up to a year to regroup and rebuild confidence amid high unemployment. Based on these assumptions, we project home resales to dive by nearly 30% this year in Canada to a 20-year low of 350,000 units.”
On the bright side, the trend could quickly reverse next year thanks to low interest rates and a bounce-back in the Canadian job market and immigration, according to Hogue, who says sales could surge by more than 40% in 2021, with many markets once again favouring sellers.
Banks Overwhelmed by Mortgage Deferral Requests
Canada’s big banks and other mortgage lenders have been inundated by requests by homeowners impacted by COVID-19 seeking mortgage assistance. More than 213,000 requests had been received as of last Thursday, according to the Canadian Bankers Association.
The big banks and other lenders announced on March 17 that they would grant mortgage deferrals of up to six months for those impacted financially by the COVID-19 pandemic. Since then, Canadians have been responding en masse wanting to either skip-a-payment on their mortgage or defer payments for several months.
“The large number of customers that have been helped continues to grow as the result of concerted efforts by front-line workers, contact-center agents and operations teams working diligently,” Mathieu Labreche, a spokesman for the Canadian Bankers Association, told BNN Bloomberg in an interview.
Scotiabank CEO Brian Porter confirmed his bank has fielded roughly 80,000 calls per day from mortgage holders exploring their options.
How do mortgage deferrals work? This is a common question as the announcement of the option has led to much confusion among borrowers. Essentially a mortgage deferral is an agreement between the borrower and the lender that mortgage payments will be suspended temporarily. But those interest payments will still have to be made at some point, not to mention additional interest on that outstanding amount. How that is done can vary by lender, but most will spread the interest on those deferred payments over future payments, “or perhaps even the life of the mortgage,” Rob Tétrault of Canaccord Genuity Wealth Management told Global News. Some may add the payments on at the back-end, he added.
Here is how Scotiabank explains the process: “During the time you defer your mortgage payments, interest will continue to accrue and will be added to your mortgage account balance at the end of the deferral period. This means your payments will be slightly higher after the deferral period ends. You will pay more in interest over the life of your mortgage, but a deferral will also help with short-term cash flow.”
Banks Accessing the BoC’s Latest Standing Facility
Nine banks have so far accessed the Bank of Canada’s recently announced Standing Term Liquidity Facility, according to the Canadian Bankers Association.
The CBA confirmed that the Bank of Montreal, Canadian Western Bank, CIBC, Equitable Bank, HSBC Bank Canada, National Bank of Canada, RBC Royal Bank, Scotiabank and TD Bank Group are all accessing the facility to “demonstrate there is ample additional lending support for clients and to underscore the value of this facility for the market.”
The Bank of Canada announced the STFL on Monday to help banks “support the liquidity needs of their clients,” Governor Stephen Poloz said in a statement.
This is just the latest liquidity initiative the BoC has announced in recent weeks. Other measures announced to date by both the Bank and the federal government include:
The launch of a $150-billion Insured Mortgage Purchase Program (IMPP).
Relaxing of eligibility criteria for portfolio insurance to help lenders access the IMPP. This includes allowing previously uninsured mortgage loans (those with 30-year amortizations and refinances) that were funded before March 20, 2020, to be eligible for mortgage insurance and to be included in future NHA MBS issuance.
A Canada Mortgage Bonds Buyback, in which the BoC “stands ready, as a proactive measure, to provide support to the Canada Mortgage Bond (CMB) market so that this important funding market continues to function well.”
OSFI, the banking regulator, announced it will allow banks to issue more covered bonds (CBs), temporarily increasing the limit from 5.5% of their assets to 10%. “This temporary relief will be provided for at least a year and could be extended beyond this, if needed,” OSFI said.
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The Canada Mortgage and Housing Corp. says construction of new homes in Canada’s six largest cities rose four per cent year-over-year during the first half of 2024, but housing starts were still not enough to meet growing demand.
The agency says growth in housing starts was driven by significant gains in Calgary, Edmonton and Montreal.
A total of 68,639 units began construction, the second strongest figure since 1990, however the rate of housing starts per capita meant activity was around the historical average and not enough “to reduce the existing supply gap and improve affordability for Canadians.”
The report says new home construction trends varied significantly across the markets studied, as Toronto, Vancouver and Ottawa saw declines ranging from 10 to 20 per cent from the same period last year.
Apartment starts in the six regions increased slightly, driven by construction of new units for rent, as nearly half of the apartments started in the first half of 2024 were purpose-built rentals.
But condominium apartment starts fell in the first six months of the year in most cities, a trend which the agency predicts will continue amid soft demand as developers struggle to reach minimum pre-construction sales required.
This report by The Canadian Press was first published Sept. 26, 2024.
TORONTO – One expert predicts Ottawa‘s changes to mortgage rules will help spur demand among potential homebuyers but says policies aimed at driving new supply are needed to address the “core issues” facing the market.
The federal government’s changes, set to come into force mid-December, include a higher price cap for insured mortgages to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
CIBC Capital Markets deputy chief economist Benjamin Tal calls it a “significant” move likely to accelerate the recovery of the housing market, a process already underway as interest rates have begun to fall.
However, he says in a note that policymakers should aim to “prevent that from becoming too much of a good thing” through policies geared toward the supply side.
Tal says the main issue is the lack of supply available to respond to Canada’s rapidly increasing population, particularly in major cities.
This report by The Canadian Press was first published Sept. 17,2024.
OTTAWA – The Canadian Real Estate Association says the number of homes sold in August fell compared with a year ago as the market remained largely stuck in a holding pattern despite borrowing costs beginning to come down.
The association says the number of homes sold in August fell 2.1 per cent compared with the same month last year.
On a seasonally adjusted month-over-month basis, national home sales edged up 1.3 per cent from July.
CREA senior economist Shaun Cathcart says that with forecasts of lower interest rates throughout the rest of this year and into 2025, “it makes sense that prospective buyers might continue to hold off for improved affordability, especially since prices are still well behaved in most of the country.”
The national average sale price for August amounted to $649,100, a 0.1 per cent increase compared with a year earlier.
The number of newly listed properties was up 1.1 per cent month-over-month.
This report by The Canadian Press was first published Sept. 16, 2024.
