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After years on the back burner, heat pumps go mainstream with sizzling hot sales

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Luise Cox is upgrading her 1960s bungalow in Mississauga, Ont., this week by tearing out and hauling away the old air conditioner and natural gas furnace. Instead, crews are replacing those units with a brand new heat pump (and some extra insulation in the attic, too).

“We needed to upgrade, and environmentally it’s better,” the 85-year old said. “We’re spending a lot on heating and cooling, so hopefully this will help.”

Heat pumps, which have been promoted for years, have failed to gain traction with the public. But that’s starting to change with rising temperatures, improved technology and government rebates, among the reasons why.

HVAC specialist Peter Messenger says they’ve gone from 10 per cent of his company’s installations to about half almost overnight.

“I’m surprised at how quickly the general public’s mindset has changed on heat pumps,” said Messenger, owner of A1 Air Conditioning and Heating in Oakville, Ont., west of Toronto. “I always knew it would happen, I just didn’t know it would happen this quickly.”

He said heat pumps accounted for about 10 per cent of his sales last year but now make up about 50 per cent.

A woman stands in front of her brick bungalow.
Luise Cox and her husband chose to install a heat pump at their Mississauga home to reduce their environmental footprint and utility costs. (Spencer Gallichan-Lowe/CBC)

Sales are growing so quickly that Messenger said he wonders whether heat pumps could even wipe out the sales of new air conditioners in homes in a few years and put a significant dent in the number of natural gas furnaces.

A heat pump often looks like an air conditioner and can function the same way. They cool a home by absorbing the heat inside and releasing it outside. But unlike an air conditioner, they can reverse the process in winter — heating a cold house without the need of a burner like a furnace, by transferring heat from where it’s not needed to where it is: inside.

“We won’t sell air conditioners. Everything will be a heat pump” in a few years, Messenger said. “People may still keep their gas furnaces, but as time goes on, I think we’re going to see less and less gas meters on people’s homes.”

The owner of a heating and cooling company stands in front of a service van and beside a new heat pump unit.
Peter Messenger, owner of A1 Air Conditioning and Heating, says government rebates are helping to reduce the cost of a heat pump, allowing people to install a much better, greener heating and cooling system for the same amount of money as a new furnace and air conditioner. (Spencer Gallichan-Lowe/CBC)

‘Perfect storm’

Heat pumps existed for decades, and more than 400,000 were installed in Canada in 2000, but� that number has doubled in the two decades since. However, a confluence of factors is driving a spike in sales this year.

The federal government’s $2.6-billion Canada Greener Homes Grant can help reduce the purchase price by $5,000, while other provincial, municipal and utility rebates in some parts of the country can help cut the installation cost further.

There is a growing familiarity with the technology, companies say, and a growing interest by homeowners to reduce their environmental footprint. Supply chain problems in recent years no longer exist.

“It’s just the perfect storm of the right factors that are driving some of this,” said Greg Donahue, product manager with Reliance Home Comfort, which operates in five provinces between Ontario and British Columbia.

This year, the company’s heat pump sales are up to seven times higher compared with 2022, he said.

“At the end of the day, if you are looking to get a new heating and cooling system in your home, you will get a better, more efficient heating and cooling system if you do a heat pump — and you’ll get it for the same or oftentimes lower cost to the homeowner,” Donahue said.

Boxes of heat pumps are piled up in a warehouse.
Reliance Home Comfort, which operates in five provinces between Ontario and British Columbia, says its heat pump sales are up to seven times higher this year compared with 2022. (Kyle Bakx/CBC)

Technology improving

The wildfire smoke and record heat waves in parts of the country are also motivating more people to buy a new cooling system, just as heat pump technology has improved to the point where it’s much more effective and efficient in a Canadian climate.

In Edmonton, increased demand for heat pumps is reducing the number of new air conditioners being installed, said Collin Goodyear, general manager of Romaniuk Heating and Air Conditioning.

But not everyone is ready to fully switch. Goodyear said people living in colder climates on the Prairies are often choosing to install heat pumps while keeping their furnaces as a backup for those extra frigid days.

“There still are those lower temperatures where the gas furnace is required, partly due to electrical costs. We still find it beneficial,” he said.

About 40,000 heat pumps have been installed or approved as part of the federal government’s Canada Greener Homes Grant, which launched in 2021.

Government subsidies are still essential to make heat pumps economical, although those in the industry say the price tag should continue to fall in the years ahead as manufacturers increase production. The price tag of a heat pump can vary. The average cost to purchase and install a system can range from about $6,000 to $14,000, depending on the size of the home.

Another challenge can be installing heat pumps at multi-family buildings, like an apartment complex, depending on the existing heating, cooling and ventilation system.

How heat pumps can cool a home in the summer and provide heat in the winter

 

Peter Messenger with A1 Air Conditioning and Heating and University of Calgary’s Sara Hastings-Simon explain how heat pumps work.

Climate goals

Heating and cooling buildings is responsible for about 13 per cent of Canada’s greenhouse gas emissions. The federal government’s goal is to cut those emissions by 37 per cent below 2005 levels by 2030, with an overall goal of reaching net zero by 2050.

The sharp rise in heat pump sales in Canada is mirrored by what’s happening in some other countries around the world, said Sara Hastings-Simon, an associate professor in the department of geoscience and the school of public policy at the University of Calgary.

“There’s a significant amount of infrastructure that has to change over to get to this net-zero target,” she said.

A woman with short brown curly hair wears glasses.
Sara Hastings-Simon of the University of Calgary says it will take time for a big shift in how buildings are heated and cooled, but each new heat pump is a step in reducing emissions. (Mike Symington/CBC)

It will take time for a big shift in how buildings are heated and cooled, but each new heat pump is a step in that direction and reducing emissions at the same time, Hastings-Simon said.

“It’s not just the silver bullet technology that comes about, but it’s actually that combination of the technology is ready, there’s a real strong case for a consumer and there’s some kind of government support — whether that’s incentives or policies that help to support that install,” she said.

Heat pumps are electric devices that can reduce a household’s environmental footprint if you’re replacing or reducing a heating unit that uses natural gas, propane or furnace oil, or a less efficient air conditioner.

The savings can add up fast. Replacing an oil furnace can save a homeowner up to $3,500 annually, according to a Natural Resources Canada study about the cost-effectiveness of heat pumps, depending on the region and type of home.

 

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Forecast for home prices, sales scaled back after slow spring: CREA – Global News Toronto

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Despite hope for lower interest rates in the months ahead, the Canadian Real Estate Association is scaling back expectations for home sales and prices after a slower-than-usual spring season.

CREA released an updated housing outlook on Friday that saw it revise down forecasts for both 2024 and 2025.

The organization now expected some 472,395 properties to change hands this year, a bump of 6.1 per cent from last year’s figures but below the anticipated 492,083 sales it called for in its previous forecast from April.

Home prices will end up at an average of $694,393 nationally, CREA said, an annual gain of 2.5 per cent. The organization’s earlier forecasts called for 4.9 per cent growth to an average price of $710,468.


Click to play video: 'Interest rate drop unlikely to affect Calgary home prices'

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Interest rate drop unlikely to affect Calgary home prices


CREA sees more recovery in the housing market in 2025 as interest rates are expected to decline, with 501,902 sales and an average price of $729,319. That’s also down from April’s expectations for 530,494 sales and an average price of $760,120 next year.

What’s changed from April to July is reduced optimism for the pace of interest rate easing from the Bank of Canada, which delivered its first rate cut of the cycle in June. Tiff Macklem, the governor of the central bank, has said that Canadians can expect a “gradual” pace of rate cuts going forward compared with the rapid rate hike cycle over the past two years.

Supply in the housing market has also built up as sellers come off the sidelines, CREA noted, but buyers remained hesitant through the spring.

“While lower interest rates are still expected to gradually bring buyers back into the market going forward, a slow spring market this year along with growing levels of supply has resulted in a downward revision to the forecast for both sales and average home prices,” the association said in a release.

In an updated forecast released Thursday, Royal LePage maintained its call for annual home prices growth of nine per cent in the fourth quarter of 2024, but CEO Phil Soper conceded to Global News that he expected “more of a reaction in the marketplace” to the Bank of Canada’s quarter-point rate cut.

The central bank’s next rate decision is set for July 24.


Click to play video: 'Interest rate cuts ‘reasonable’ to expect if inflation lines up with Bank of Canada’s expectations: Macklem'

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Interest rate cuts ‘reasonable’ to expect if inflation lines up with Bank of Canada’s expectations: Macklem


Re/Max Canada president Chris Alexander told Global News earlier this week that he expects there will need to be at least two more rate cuts before buyers come back in a meaningful way.

If the central bank delivers a rate cut later this month, he expects the fall housing season will kick off with a “really robust” September.


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“So many cities and people are waiting for more favourable buying conditions, and it does, unfortunately, come down to interest rates,” Alexander says.

“We’re still at the mercy of the Bank of Canada at the end of the day.”

June sales, prices show ‘signs of renewed life’

Canada’s housing market was starting to show “early signs of renewed life” by the end of the spring, CREA said in a separate release highlighting June sales figures. On a monthly basis, home sales activity was up 3.7 months from May, the association said.

The average, non-seasonally adjusted sale price for a home last month in Canada was $696,179, down 1.6 per cent year-over-year.

But CREA’s Home Price Index did tick higher by a tenth of a percentage point, which, while small, was the first hike in 11 months. The market tightened overall as sales outpaced new listings in the month.


Click to play video: 'June interest rate cut didn’t revive Canada’s housing market, data shows'

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June interest rate cut didn’t revive Canada’s housing market, data shows


“It wasn’t a ‘blow the doors off’ month by any means, but Canada’s housing numbers did perk up a bit on a month-over-month basis in June following the first Bank of Canada rate cut,” said CREA senior economist Shaun Cathcart.

Prairie provinces and Quebec are showing more signs of price appreciation amid competition for homes in those markets, while Canada’s most expensive cities, like Toronto, are facing unseasonably slow sales. Buyers in these markets have more choice with plenty of inventory on hand, CREA chair Jason Mabey said in a release.

Supply in June might have gotten a lift from changes made to capital gains taxes last month, TD Bank economist Rishi Sondhi suggested in a note to clients on Friday.

As part of its 2024 federal  budget, the Liberal government in June raised the inclusion rate on capital gains realized above $250,000 in a year from one-half to two-thirds for individuals. While primary residences are excluded from capital gains, the changes do impact investors with secondary properties.

Sondhi said that listings may have seen a lift from investors rushing to offload their properties before the June 25 deadline when the changes took effect, but he added that “unfortunately, data gaps preclude a definitive statement on the matter.”


Click to play video: 'How capital gains tax changes impact family cottages'

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How capital gains tax changes impact family cottages


BMO senior economist Robert Kavcic said in a note to clients that, despite a single rate cut from the Bank of Canada, housing activity “remained subdued” in June.

Fixed-rate mortgages, which respond only indirectly to the central bank’s rate moves, are already lower than the more closely correlated variable mortgages, he noted. With few borrowers out there currently taking the variable route, “these early rate cuts aren’t having a big impact,” Kavcic said.

In the absence of meaningful rate cuts to restore affordability in the most expensive markets, buyers are moving to where ownership is more attainable, which Kavcic says is driving activity and prices higher in cities such as Calgary, Edmonton, Regina and Winnipeg.

While many buyers in the market today have been able to secure fixed-rate mortgages below the five-percent bar, Soper told Global News that rates on offer will have to start floating in the range of 4.0-4.5 per cent before buyers are confident enough to seriously test the market.

“It probably will take an additional couple of rate cuts of that magnitude to start to make a real difference,” he said earlier this week.


Click to play video: 'Steady home demand in Edmonton as people move to Alberta'

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Steady home demand in Edmonton as people move to Alberta


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'Ontarians can be the judge:' Taxpayers group wants grocers to sell alcohol during LCBO strike – CP24

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LCBO workers have now been on strike in Ontario for a full week and at least one group says it might be time for the government to consider allowing other retailers to sell spirits.

Jay Goldberg, who is the Ontario Director of the Canadian Taxpayers Federation, held a press conference outside Queen’s Park on Friday to call on the Ford government to consider opening up alcohol sales to grocery stores and other private retailers during the labour disruption, calling it the “perfect opportunity” to evaluate the LCBO’s current monopoly on spirit sales.

“The union says that they offer the best service, the best customer service and the best choice and selection. But while they are on strike we believe that Ontarians should have an option. Ontarians should have a choice and we can see how it goes at grocery stores. Ultimately, Ontarians can be the judge as to whether or not these unionized government-run LCBO locations are actually the best in terms of convenience, price and service,” Goldberg said.

The Ford government has previously said that the LCBO will retain the exclusive right to sell spirits in the province, even as it allows convenience stores to beginning selling beer and wine.

A spokesperson for the premier’s office reiterated that promise in an email to CP24 on Friday, saying the government has “no plans to expand to spirits.”

“The LCBO will continue to be the exclusive seller of spirits across the province. Furthermore, LCBO.com and the LCBO mobile app continues to accept orders, including spirits, for free home delivery anywhere in Ontario for the duration of a strike,” the statement read. 

The union representing LCBO workers, however, has spoken out against the expansion of ready-to-drink beverages into grocery and corner stores and has suggested that the issue is a stumbling block to reaching a deal with the province.

Premier Doug Ford, for his part, has said that the government will not walk back its plans to expand alcohol sales in an effort to end the strike.

“If they want to negotiate over RTD, the deal is off,” Ford told reporters at a news conference at a brewery in Etobicoke on Wednesday. “Let me be very clear. It is done, it is gone. That ship has sailed. It’s halfway across Lake Ontario.”

The LCBO strike has shuttered liquor stores across Ontario, though the government has said that it has contingency plans to reopen 32 stores on July 19, albeit for only three days a week and with limited hours.

Speaking with reporters on Friday, Golberg called the current strike a “war on convenience” and slammed workers for walking off the job over what he called the “common sense” expansion of alcohol sales in the province.

He said that in the absence of labour peace, the government should immediately allow grocery stores to sell “all types of alcohol.”

“This is a strike that the LCBO union decided to go on but we are saying now that the union has made the decision that they are striking it is time for the government to act on this crucial issue,” he said.

“I think what Ontarians will find is what we have found in many other provinces, like Alberta, British Columbia and Saskatchewan: having more locations and more choice and more convenience means not having a government-run monopoly.”

The union representing LCBO workers has previously warned that the Ford government’s plans to open up the sale of some alcoholic beverages to private retailers could result in significant job losses among its members.

“Doug calls himself a businessman. And I want to know what business person gives away some of their most profitable products and the largest growing market really right now and gives it away to everybody else,” Colleen MacLeod, the chair of OPSEU/SEFPO’s liquor board employees division, told CP24 earlier this week.

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Hudson’s Bay temporary stores closures hints at signs of stress: retail experts

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Hudson’s Bay Co. made headlines last week after announcing it hoped to create a powerhouse in the world of luxury goods with the acquisition of Neiman Marcus Group LLC, but for some Canadian shoppers at its iconic Bay chain, it’s the basics that remain a bigger concern.

A number of Bay stores across Canada were temporarily closed this week for repairs in their heating, ventilation and air-conditioning systems, according to various media reports. For example, stores were closed in Vancouver, West Vancouver, Nanaimo, B.C., Coquitlam, B.C., and Victoria on Tuesday, according to the Vancouver Sun. Stores were also reported to have closed in Winnipeg and Windsor, Ont.

In recent months, shoppers have taken to social media to point out issues with maintenance at numerous Bay stores across the country, including repeated escalator outages and problems with air conditioning. The company declined to comment on the posts.

But some retail analysts view this week’s temporary closures as signs of stress, suggesting a lack of general upkeep due to the financial headwinds facing the sector.

“It is definitely not normal,” Liza Amlani, principal and founder of the Retail Strategy Group, said. “They thought (temporarily) closing the stores would be more cost-effective than bringing someone in to fix the problems and making some sales. That tells me that certain stores at the Bay are struggling.”

HBC last week said the completion of its US$2.65-billion deal to buy Neiman will create a separate entity for its Canadian business, which includes the Bay stores and a real estate portfolio estimated to be worth $2 billion.

The Canadian business will be “recapitalized as a standalone entity with significantly reduced leverage and enhanced liquidity,” the company said in a statement last week. “HBC’s Canadian business will be well positioned to support future growth while continuing to serve its loyal Canadian customer base.”

HBC did not provide any comment or elaborate on how creating a separate Canadian entity will help improve the situation of some of its stores in Canada.

Amlani said it could ultimately mean closing stores that aren’t profitable and focusing on the ones doing well.

“Separating Canada … is going to allow the leadership team to truly see what they can do with the Canadian entities and real estate,” she said.

Retail analyst Bruce Winder said that creating a separate Canadian entity could mean that the Bay will need to be self-sufficient because it is now “sort of on its own.”

According to David Ian Gray, principal and retail strategist at DIG360 Consulting Ltd., the Bay may not be the primary focus for HBC senior leadership. They will be more focused on Saks Global, the new company formed after the merger of HBC’s Saks and Neiman. Getting that merged entity up and running will take “time and effort,” he said.

Gray said he thinks keeping the Canadian operations separate could potentially “help increase a dedicated focus” on them and free up some funding, but it does not guarantee additional funding and resources will be used for core issues.

“The Bay needs to dial back the perpetual cycle of discounting,” he said. “Yet a critical mass of stores is needed for the volume of orders to attract brands and favourable pricing from vendors. On top of this, funds will be needed to update stores that have been neglected for a number of years. Relationships with customers and vendors will also need to be repaired before any hope of real revitalization.”

In November, HBC completed a series of real estate transactions to raise US$340 million in cash that the company said it would use to help fund its retail operations after falling behind on payments to its suppliers, according to the Globe and Mail.

Other department stores have faced headwinds in recent years, too. In addition to the pandemic and competition from online retailers, many brands have started to open their own stores in the past decade, which has affected the relevance of department stores that curate products from luxury brands.

For example, Nordstrom Inc. exited the Canadian market in 2023. HBC, meanwhile, has already reduced its footprint and is planning to close its store in downtown Regina in 2025.

Some analysts say HBC will benefit from the Neiman acquisition by lowering costs through back-office synergies and the elimination of redundant positions. The creation of a larger luxury sales company would also mean HBC would have more power when negotiating with brands that use its real estate to sell their products.

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