Canadians are about to get an update on the state of the housing market and the latest resurgence of COVID-19 has only added another layer of confusion to a year of uncertainty over where real estate prices will go in 2021.
On Tuesday, the Canadian Real Estate Association is expected to roll out its latest sales figures and prices for resale homes, and while most property watchers see a continuing short-term trend of weakening high-rise condo prices and increasing low-rise prices, the longer term impact of the pandemic remains far less certain.
An informal sampling of economists who keep an eye on the residential real estate market shows a range of views based on considerations related to how long the impact of the disease will last, including rock-bottom borrowing rates and whether buyers will continue to bid up the price of low-rise homes most in demand.
When it comes to residential real estate, price changes have a big effect on ordinary people for whom a home is a place to live, not just an investment. But even then, for most people a home remains their largest lifetime purchase. And unlike other investments, managing real estate is relatively complex and demanding.
Unintentional landlord
When Anna Blackwell and her husband bought a two-bedroom downtown condo in 2016, the Wilfrid Laurier University political science grad had no intention of becoming a landlord. But after one of the pair was offered a transfer to Portland, Ore., the couple decided to rent out their Toronto home — at least until they knew if the move stateside was going well. In September their tenant gave notice and, at the end of November, moved out.
“We were quite shocked when we found out how much lower we’d have to list to get our place rented in this competitive market,” Blackwell said in an email conversation. The property that had been earning $3,150 a month was now generating $2,600.
Falling rents have been good for tenants. And though the decline hurt, it was by no means devastating for Blackwell, who bought four years ago in a sharply rising market. But as the business news service Bloomberg pointed out last week, property investors taking possession of condos they signed up to buy when the market looked hot, are now caught in a bind — having to accept losses on rent or a loss when they sell.
Investors who signed up to buy condos when the market looked hot are now caught in a bind — having to accept losses on rent or a loss when they sell. (Don Pittis/CBC)
The decline in rental income and property prices did not come as a surprise to Ben Rabidoux — who runs North Cove Advisors, an information service for the professional residential real estate market — and who predicted the current shakeup in the rental market back in April. He suggested a sharp fall in demand, accentuated by what some saw as an excess of high-rise construction in some of Canada’s hottest markets, would translate into declines in sale prices if the effect of the pandemic lasted more than six months.
Blackwell was lucky to get a tenant for her Toronto condo. Other reports say vacancies have risen so much that speculators are moving to buy rental buildings, hoping to upgrade empty flats and charge more once the market bounces back, since in many markets empty flats are less affected by rent controls.
Although based on U.S. figures, data from Pew Research shows that, as the economic effects of the pandemic continue, more young people are living with their parents than at any time since the Great Depression. That was only one of the reasons, including a plunge in immigration and a decline of temporary residents, including foreign students, that Rabidoux cited for the falloff in real estate demand.
Like the rental speculators, economists representing real estate businesses and experts in the banking industry almost universally express confidence that declines in the condo market are temporary and that markets will get back on track once Canadians are vaccinated.
Many say that outside crowded city centres, demand for housing in suburbs, smaller cities and rural areas will only strengthen. BMO economist Jennifer Lee suggests buyers will continue to look for more space in a work-from-home boom which may not end with the pandemic.
“Instead of taking the train in, you can go a little further away now where real estate in the past has been cheaper,” said Lee.
Going a little further away
Carl Gomez, Canadian chief economist for the U.S. real estate data giant CoStar, agrees that rising house prices in big cities will continue to push up demand outside the urban centres. But he is less confident that pent-up demand created by low rates during the first lockdown can persist at the same rate.
On Friday, Statistics Canada released new data showing that consumers were back on a borrowing binge, and that demand for mortgages and housing investments hit an all-time record during the three months ending in September. Data from Vancouver and Toronto real estate boards earlier this month hints that, for now, that rush to borrow continues.
But Gomez says inner-city markets like Toronto have seen a glut of what he calls “shoe box condos” favoured by investors — not to live in or even necessarily to rent, but because they have been steadily increasing in value.
“I question whether that demand is going to be there in the long run,” he said.
The long term really matters for the homes we buy to live in for decades at a time. And while high levels of immigration have helped push up demand in recent years and falling interest rates have helped lift prices, not everyone is convinced those two things are going to continue.
Many suggest demand for housing in suburbs, smaller cities and rural areas will only strengthen as people look for more space in a work-from-home boom which may not end with the pandemic. (Don Pittis/CBC)
Economist Moshe Lander is one of those willing to say some of the things that people in the property business would just as soon leave unsaid. Landerworries the pandemic could signal a demographic turning point in the market.
“No matter how much immigration we have, there’s not enough incoming demand for housing in whatever form,” said Lander, citing Canada’s aging population and low birth rate. “It’s just not the great investment that it used to be.”
He said that people in Alberta and those who invested in Toronto condos are getting a little taste of a market that does not reliably rise month after month and year after year. And he warns that today’s attractive interest rates, now as low as one per cent, may end up having a distorting effect because there is no way they can last over the life of the mortgage.
“[Home-buyers] could find themselves very quickly sitting in a situation where the real value of their debt hasn’t been eroded by inflation,” said Lander, “and they are now facing higher interest rates with very little equity built up in the home, especially if house prices don’t rise the way they used to.”
TORONTO – The Toronto Regional Real Estate Board says home sales in October surged as buyers continued moving off the sidelines amid lower interest rates.
The board said 6,658 homes changed hands last month in the Greater Toronto Area, up 44.4 per cent compared with 4,611 in the same month last year. Sales were up 14 per cent from September on a seasonally adjusted basis.
The average selling price was up 1.1 per cent compared with a year earlier at $1,135,215. The composite benchmark price, meant to represent the typical home, was down 3.3 per cent year-over-year.
“While we are still early in the Bank of Canada’s rate cutting cycle, it definitely does appear that an increasing number of buyers moved off the sidelines and back into the marketplace in October,” said TRREB president Jennifer Pearce in a news release.
“The positive affordability picture brought about by lower borrowing costs and relatively flat home prices prompted this improvement in market activity.”
The Bank of Canada has slashed its key interest rate four times since June, including a half-percentage point cut on Oct. 23. The rate now stands at 3.75 per cent, down from the high of five per cent that deterred many would-be buyers from the housing market.
New listings last month totalled 15,328, up 4.3 per cent from a year earlier.
In the City of Toronto, there were 2,509 sales last month, a 37.6 per cent jump from October 2023. Throughout the rest of the GTA, home sales rose 48.9 per cent to 4,149.
The sales uptick is encouraging, said Cameron Forbes, general manager and broker for Re/Max Realtron Realty Inc., who added the figures for October were stronger than he anticipated.
“I thought they’d be up for sure, but not necessarily that much,” said Forbes.
“Obviously, the 50 basis points was certainly a great move in the right direction. I just thought it would take more to get things going.”
He said it shows confidence in the market is returning faster than expected, especially among existing homeowners looking for a new property.
“The average consumer who’s employed and may have been able to get some increases in their wages over the last little bit to make up some ground with inflation, I think they’re confident, so they’re looking in the market.
“The conditions are nice because you’ve got a little more time, you’ve got more choice, you’ve got fewer other buyers to compete against.”
All property types saw more sales in October compared with a year ago throughout the GTA.
Townhouses led the surge with 56.8 per cent more sales, followed by detached homes at 46.6 per cent and semi-detached homes at 44 per cent. There were 33.4 per cent more condos that changed hands year-over-year.
“Market conditions did tighten in October, but there is still a lot of inventory and therefore choice for homebuyers,” said TRREB chief market analyst Jason Mercer.
“This choice will keep home price growth moderate over the next few months. However, as inventory is absorbed and home construction continues to lag population growth, selling price growth will accelerate, likely as we move through the spring of 2025.”
This report by The Canadian Press was first published Nov. 6, 2024.
HALIFAX – A village of tiny homes is set to open next month in a Halifax suburb, the latest project by the provincial government to address homelessness.
Located in Lower Sackville, N.S., the tiny home community will house up to 34 people when the first 26 units open Nov. 4.
Another 35 people are scheduled to move in when construction on another 29 units should be complete in December, under a partnership between the province, the Halifax Regional Municipality, United Way Halifax, The Shaw Group and Dexter Construction.
The province invested $9.4 million to build the village and will contribute $935,000 annually for operating costs.
Residents have been chosen from a list of people experiencing homelessness maintained by the Affordable Housing Association of Nova Scotia.
They will pay rent that is tied to their income for a unit that is fully furnished with a private bathroom, shower and a kitchen equipped with a cooktop, small fridge and microwave.
The Atlantic Community Shelters Society will also provide support to residents, ranging from counselling and mental health supports to employment and educational services.
This report by The Canadian Press was first published Oct. 24, 2024.
Housing affordability is a key issue in the provincial election campaign in British Columbia, particularly in major centres.
Here are some statistics about housing in B.C. from the Canada Mortgage and Housing Corporation’s 2024 Rental Market Report, issued in January, and the B.C. Real Estate Association’s August 2024 report.
Average residential home price in B.C.: $938,500
Average price in greater Vancouver (2024 year to date): $1,304,438
Average price in greater Victoria (2024 year to date): $979,103
Average price in the Okanagan (2024 year to date): $748,015
Average two-bedroom purpose-built rental in Vancouver: $2,181
Average two-bedroom purpose-built rental in Victoria: $1,839
Average two-bedroom purpose-built rental in Canada: $1,359
Rental vacancy rate in Vancouver: 0.9 per cent
How much more do new renters in Vancouver pay compared with renters who have occupied their home for at least a year: 27 per cent
This report by The Canadian Press was first published Oct. 17, 2024.
