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January real estate report 2021

Condos drop

Montreal condos on REM sites were the exception to a record breaking year
for Canadian real estate.

Rates will likely remain low, but there is talk of change.

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Informative real estate articles

REAL ESTATE
Transit, mall development to spur growth of Montreal’s West Island
( G&M - Staff)  - Financial Services Industry Structural Issues

Montreal’s new light-rail transit system is set to change the landscape of the city’s commercial real estate market, according to industry experts.

Canadian Mortgages Over 120 Days Past Due Rises At The Fastest Pace In Years
(Better Dwelling - Daniel Wong)  - Risk Management Issues
More serious delinquencies are a little more choppy, but still down on the quarter. The rate of mortgages more than 90 DPD, but under 120, fell 0.56 bps in Q3 from last year. This follows an increase of 0.33 bps in Q2, and shows a generally rising trend in 2019 with Q4 being an exception. Such a sudden swing is most likely attributed to payment deferrals. Earlier stage delinquencies were generally falling, but more people are carrying over into real delinquencies.
Toronto home prices hit record in 2020, rising 13.5% to average $930,000
(FP - Ari Altsteder)  - Financial Services Industry Structural Issues
The average price for homes sold in Canada’s largest city last year hit $930,000, the highest on record and up 13.5 per cent from 2019, the Toronto Regional Real Estate Board said Wednesday in a release.
Toronto Real Estate Prices Slip In December, But Suburban Prices Soar To Lift Index
(Better Dwelling - Kaitlin Last)  - Financial Services Industry Structural Issues
Greater Toronto’s composite price made a big jump for the month, and is now much higher than last year. TRREB’s composite benchmark price reached $909,500 in December, up 0.78% ($7,000) from the previous month. This represents an increase of 11.05% when compared to the same month last year. Both the monthly and annual increase are substantial. It becomes much more complicated (and interesting) when this number is broken down. 
Greater Vancouver Detached Real Estate And Condos Are Both Flat From 3 Years Ago
(Better Dwelling - Kaitlin Last)  - Financial Services Industry Structural Issues
Greater Vancouver real estate prices climbed last month, bringing annual gains closer to where they were a few years ago. The composite benchmark price reached $1,047,400 in December, up 0.3% from the previous month. Prices are now 5.4% higher than the same month last year, and about 0.2% from 3 years ago. Fairly substantial gains for the composite, but still just regaining ground from a few years ago. 
Toronto luxury home sales hit record in 2020
(Investment Executive - ANITA BALAKRISHNAN)  - Financial Services Industry Structural Issues
Although the “uber-luxe” homes highlighted in the Re/Max report are a small fraction of the overall home sales market, Re/Max’s Christopher Alexander said the luxury home market reflects broader trends emerging from the pandemic. Toronto average home prices hit a new high of $929,699 in 2020, the Toronto Real Estate Board said on Wednesday, as the number of homes sold rose to 95,151, up from 87,751 in 2019.
Canada’s Largest Real Estate Markets Are Still Far From Seeing Employment Recover
(Better Dwelling)  - Risk Management Issues
Toronto employment did a little better, with a small uptick last month. There were 3.45 million people employed in the region in December, up 1,100 (+0.03%) jobs from the previous month. This represents a drop of 82,200 (-2.33%) jobs compared to the same month last year. The increase was within the margin of a rounding error though, so it’s too soon to say it’s bucking the trend. However, the small increase is better than nothing.
Canada’s Economy Has Never Been More Dependent On Real Estate
(Better Dwelling - Daniel Wong)  - Financial Services Industry Structural Issues
Residential investment has recovered much faster than other segments of GDP. Residential investment represents 9.43% of GDP in Q3 2020, up from 7.71% during the same quarter last year. This is not only the highest rate seen in at least 60 years, but it’s also very high for any country. For context, the U.S. residential investment peaked at 6.7% in 2006 during the housing bubble. The current rate in the U.S. is just 4.3%, having also sharply accelerated faster than GDP in the third quarter. Just not nearly as much as Canada. 
Downtown Toronto office vacancy rate hits highest level since global financial crisis
( G&M - Rachelle Younglai)  - Risk Management Issues

Office vacancy rates have climbed across the country during the pandemic, with downtown Toronto’s jumping to 7.2 per cent in the fourth quarter, as tenants tried to offload space and did not renew leases after months of having their employees work remotely.

First Capital REIT slashes monthly payout in half amid pandemic shutdowns
( G&M - Tim Kiladze )  - Risk Management Issues

Retail landlord First Capital Real Estate Investment Trust cut its monthly distribution in half as economic shutdowns escalate across Canada, marking the second major retail REIT to slash its payout over the past month.

Canada’s Mortgage Lenders Have Set Aside A Record Amount For Bad Loans
(Better Dwelling - Daniel Wong)  - Financial Services Industry Structural Issues
The amount set aside for losses has climbed to a new record high, and is growing unusually fast. Allowances reached $3.9 billion in Q3 2020, up 22.01% from the previous quarter. This represents an increase of 54.11% when compared to the same quarter last year. It’s not just a record high for dollars, but also the highest rate of growth in over a decade.
Toronto, Montreal see exodus pick up pace, aggravated by COVID-19 pandemic
( G&M - Matt Lundy)  - Attitude and Preference Issues

Over a 12-month period ending July 1, 2020, and overlapping with the first wave of the pandemic, the metropolitan area of Toronto saw a net intraprovincial outflow of 50,375 people, according to Statistics Canada figures released Thursday. That means 50,375 more people left the Toronto area for other parts of Ontario than moved in – a record high according to data going back almost two decades.

RBC Execs Call Falling Real Estate Prices, While Their Economist Says They’ll Rise
(Better Dwelling)  - Attitude and Preference Issues
Robert Hogue, RBC’s senior economist, has forecast real estate prices will make big gains early in the year. The economist is calling an 8.4% increase at the national level in 2021. Ontario is expected to make a 9.6% increase, followed by Quebec at 9.0%, and B.C. an 8.3% gain. He also adds, this is driven by a shortage of supply almost everywhere. The only exception being downtown condos in major real estate markets.
What will commercial real estate look like in 2021?
( G&M - Christina Varga)  - Risk Management Issues

Areas outside downtown cores have also been affected by lockdowns, and building owners and managers, business and retail tenants and investors and developers are not only looking to respond in the short term but are looking at what trends may continue long term.

 
Toronto apartment vacancy rates spike to record high, monthly rent plunges
( G&M - Rachelle Younglai)  - Evolving Legislative/Regulatory Issues

Apartment vacancy rates in Toronto spiked to 5.7 per cent last year, a record high as demand weakened during the pandemic and sent rental prices tumbling.

CMHC reports annual pace of housing starts down in December
( G&M - CP)  - Financial Services Industry Structural Issues

The annual pace of housing starts in December fell compared with November, according to Canada Mortgage and Housing Corp.

Why the Bank of Canada could be among the first to raise interest rates
(FP - Kevin Carmichael)  - Public Policy Issues
Paris-based BNP Paribas SA’s currency portfolio is “overweight” loonies and Momtchil Pojarliev is advising the bank’s clients to do the same. He reckons the Canadian dollar is undervalued, since the petrocurrency’s price hasn’t fully adjusted to the likelihood of stronger oil prices as the global economy recovers from the pandemic.
Private-sector mortgage insurers say they're gaining market share in wake of CMHC tightening rules
(FP - Geoff Zochodne)  - Evolving Legislative/Regulatory Issues
Regulatory data for Canada Guaranty Mortgage Insurance Co., which is owned by Ontario Teachers’ Pension Plan and Canadian financier Stephen Smith, showed business was booming as of the end of the third quarter.
New Home Construction in Canada Drops From Elevated Levels
( Bloomberg - Chris Fournier and Erik Hertzberg)  - Financial Services Industry Structural Issues

Home starts declined to 228,300 units last month on an annualized basis, down 12.6% from a revised 261,200 units in November, Canada Mortgage and Housing Corp. said Monday in Ottawa. The overall number missed the 230,000 median forecast in a Bloomberg survey.

Amazon to spend $2-billion on affordable housing in the U.S.
( G&M - Video)  - Industry Conduct and Practices Issues
Amazon said on Wednesday it would spend $2-billion to create affordable homes in regions where three of its major U.S. employment hubs are located.
Fannie, Freddie Tighten Rules for Condos in Vacation Locales
(WSJ - Andrew Ackerman)  - Evolving Legislative/Regulatory Issues

Getting a mortgage for a resort-area condo might become more difficult after Fannie Mae and Freddie Mac moved to tighten rules on buildings with many short-term rentals and hotel-like amenities, some Realtors and bankers say.