The residential real estate market has been a bright spot in Canada’s economic recovery from Covid-19. Last month, home prices and sales reached a record from pent-up demand combined with low interest rates and tight inventory. Although the market has defied expectations, economists predict the gains will peter out in line with other data that shows a slow down in activity as cases rise and restrictions get re-imposed.
Canadian mortgage debt is slowing in growth, after a surge at the beginning of the pandemic. Bank of Canada (BoC) data shows outstanding mortgage credit reached a new high in August. At the beginning of the pandemic, the rate of growth had accelerated due to payment deferrals. Deferrals are beginning to expire now, sending growth back down to pre-pandemic levels.
Vacancy rates in Canada’s tightest office markets are spiking, as employees continue to work from home and more businesses try to get rid of space amid the economic fallout from the novel coronavirus pandemic.
Debt is future income used today. As debt loads get higher, more future spending is pulled forward. The higher these debt loads get, the more future growth is being used. Lower interest rates may have spurred this borrowing binge, by lowering service costs. However, as people get used to low rates (or depend on them), the stimulus effect is gone. Eventually, you’re just left with households increasingly vulnerable to shock.
A relatively new Canadian real estate agency, whose founders gained experience at Uber Inc. and Blackberry Ltd., is betting on artificial intelligence to alleviate the stress of buying a new home before selling an existing one.
The federal government allowed its small-business pandemic rent-relief program to expire at the end of September without providing details for its long-promised replacement, leaving thousands of entrepreneurs facing full rent payments as October begins.
Canada’s population slowed to a multi-year low for the rate of growth, but still made substantial gains. Stat Can estimates the population reached 38.01 million in Q3 2020, up 25,384 (0.07%) people from the previous quarter. Compared to last year, this works out to an increase of 411,854 (1.10%) people. Extremely slow quarter, but it gives an idea of how quickly the population was growing before the pandemic.
Real estate had grown to represent about 15 per cent of gross domestic product, compared with about 11 per cent 2007, according to Statistics Canada data. Siddall then delivered another jolt: he called on legislators to resist the urge to respond with new policies that would make it easier for Canadians to purchase homes.
Toronto condo apartments for rent are swelling to an unusually high level for this time of year. There were 7,901 units for lease in September, up 96.4% from the same month last year. This is the biggest September for rental inventory in at least half a decade. As for bigger months, only July and August have had more, over the same time period.
It is speculated that this is being done while buyers are submitting offers on numerous properties simultaneously, with the intent to later sit back and decide which property they like best, or the one where they got the best deal. Then they do not show up with the deposit cheque, as called for in the offer for all other properties that they are no longer interested in pursuing.
After a decade of centre-left municipal governance, Vancouver’s 2018 election saw voters back a fractured city council. Seats were split among four parties, roughly divided between left and right, with the new mayor, a former NDP MP, running as an independent.
Active listings of condos in downtown Toronto hit a record at the end of September and were 215 per cent higher than a year earlier, according to Urbanation data. That compares with just a 5.3 per cent rise in total housing listings across the city during the month, according to TRREB data released Tuesday.
The price of a typical home in Greater Toronto advanced quickly, but needs a little unpacking. TRREB’s composite benchmark, aka the price of a typical home, hit $897,700 in September, up 11.6% from last year. In the City of Toronto, this number reached $971,500, up 9.0% from last year. When looked at in aggregate, both numbers are higher and growth is accelerating. However, when disaggregated we see two totally different markets.
To appreciate how many cranes Toronto has, you need to see how distant other markets are. Seattle has the second most cranes in the index at 43, up from 36 earlier this year. Los Angeles follows with 41 cranes, down from 47 in Q1. Calgary comes in third with 34, down from 37 in Q1. The second closest market has nearly a third of the cranes as Toronto. All three markets combined still add up to fewer than Toronto as well.
Typically rising demand for a product invites more players to a game. Not this time. Due to rising replacement values and more claims, the market is now less attractive. Fewer insurers want to deal with condos, when other segments are more profitable. Already rapidly rising replacement costs rise even faster during a construction boom. It also places a strain on labour, sending wages higher. In short, it’s the perfect recipe to demolish margins. Combine that with an increase in climate related damage claims, and it’s not exactly a lucrative market insurers want to chase.
The seasonally adjusted annualized rate of housing starts fell by 20.1% to 208,980 units from a revised 261,547 units in August, the Canadian Mortgage and Housing Corporation (CMHC) said. Economists had expected starts to fall to 240,000.
Almost every working Canadian eventually wants to buy a home. And most end up doing so, given the home ownership rate is more than 66 per cent. Take out young people who can’t yet muster the down payment and the lowest quartile of income earners, and the ownership rate rises to about 90 per cent. It might come as a surprise, then, that owning is not always better than renting. Even more counterintuitive, renting would have been the better option for anyone who retired in the past decade, in spite of the hot housing market.
“A wide disconnect between housing, the economy and/or job markets doesn’t tend to be sustained,” the report said. “[I]t’s more likely that housing moderates than [that] job fundamentals improve sharply from here, given the lasting impacts of the pandemic.”
Negative interest rates are when this rate falls below zero, meaning the bank is charged to store money. By charging banks, central banks hope to encourage lending more freely. It also means households that deposit money may receive less than they deposit. More simply put, it’s a penalty for saving. It’s assumed this means people will borrow more.
As a result, they hit a new record high of just over $600k in August. Regionally, the rebound in prices has been broad-based, with positive annual price growth in every province in August, and 6 of 10 posting double-digit advances. The softest y/y gain occurred in Alberta although even here, prices were still up 5.3%.