Cory Cook’s initial plan was to build outhis backyard deck. But as the pandemic drags on, he’s looking to overhaul his entire basement. “The renovated basement would generate rental income and offer financial security in the event of a job loss,” says the 43-year-old Toronto father of two.
In two reports released Monday, the federal housing agency said the number of move-in ready homes outside of city centres in Toronto, Montreal and Vancouver has begun soaring. The number of urban properties starting construction is also edging up.
Canadian real estate hit a new all-time record number of sales last month. There were 36,897 unadjusted sales on the MLS in January, up 35.2% from the same month as the year before. Seasonally adjusted, that number is 61,371, up 2.0% from a month before. The unadjusted number is a record for any January. During a pandemic.
Mortgage related ECLs soared in the recent data, reaching levels not seen before. ECLs came in at $1.482 billion in Q3 2020, up 22.99% from the previous quarter. Compared to a year before, this represents an 85.95% increase. It works out to 0.09% of mortgage credit that’s earmarked for losses. This is up almost double from the rate just a year before. Is that bad? It depends who’s looking at it.
The demand for cottage country dwellings has increased for two reasons. The first is the rise of working from home or teleworking, making it possible for knowledge economy professionals to live and work from spacious residences near nature and water. Even if they can only partially work from home, they can trade in their urban dwellings for a cottage and a pied-à-terre in the city for the days when they must visit work.
Prices have been spurred by strong demand amid a boom in home remodeling and construction fueled by stay-home orders. The onslaught of demand has handicapped producers’ abilities to restock inventories quickly enough, further supporting prices. The rally has stoked concerns of inflation bleeding into the home-buying market.
The price of a typical home across Canada made a sharp increase, not just over the year – but last month. The benchmark price reached $669,000 in January, up 2.2% (+$14,400) from a month before. This represents an increase of 13.5% ($79,800) from the same month one year ago. To say this is an astronomical increase in home prices at the national level, is a bit of an understatement.
But alongside this unlikely, unpredicted boom, there were other shifts under way. Prices have skyrocketed in cottage country while demand for condos has cratered. Meanwhile, the debt used to finance these new homes no longer seems quite so worrisome – at least, for now. The following charts, statistics and dollar figures offer a snapshot of the Canadian real estate market today, in all of its prediction-defying glory.
After a lull in March and April, sales activity and prices set new records month after month. With interest rates at historic lows, homeowners sick of their living arrangements upscaled to roomier digs in the cities, the suburbs and rural areas. The cost of detached homes rose fastest of all in most markets, with momentum accelerating into this year, with new records for sales and prices yet again.
Investing in US equity markets greatly outperformed Canadian equity markets. The cash put into the NASDAQ 100 (QQQ) would have generated a 44.6% (+$89,200) return over the past year. The same cash in the TSX 60 (XIU.TO) would have returned around 2.97% (+$5,940) over the same period. The NASDAQ is largely tech focused, whereas the TSX is largely into financials and mining. Where did you think your mortgage interest went? Not exactly a mystery why Canadians have been sinking record cash into US equities.
“Unlike with mortgage borrowing, households ended 2020 with nearly $12 billion less in non-mortgage debt than at the beginning the year,” StatsCan said, noting that December was the eighth-straight month that registered a year-over-year decline in non-mortgage borrowing.
Canadian HELOC debt fell in the latest number, making the biggest drop for the month in years. The outstanding balance reached $259.73 billion in December, down 0.14% ($369 million) from the month before. This represents a 1.58% ($4.04 billion) increase from the same month last year. Both of these numbers are unusually low for a December, even in a recession.
Q4 Prime loan originations were ahead of last year by 87% and up 63% from Q3 as the Bank continued to build its franchise in the insured market, while alternative lending originations were 69% higher than Q3 and 2% above last year as the Bank's lending appetite increased late in the year reflecting resilient markets.
Now that metaphorical stature takes on a new dimension, with Salesforce.com Inc. — the anchor tenant of the 61-story building’s Class A office space — announcing a permanent “work from anywhere” policy that lets employees remain on remote or flexible schedules after the pandemic ends. As San Francisco’s largest private employer, the customer-management software giant is a heavy hitter on the list of companies with similar plans set to affect downtown office spaces, including Twitter, Facebook and Square, prompting tough questions about the vitality of the city’s core and overall economy.
“This is a much bigger urban workforce shift. It’s saying, tech doesn’t need to be anywhere,” said John King, the San Francisco Chronicle’s urban design critic. That shift applies to cities beyond the San Francisco Bay Area — including in Salesforce’s other offices worldwide — but it may hit America’s tech center especially hard. In the heart of the city that’s in the heart of the region sits a behemoth tower and adjacent transit center where the namesake company will now de-emphasize commutes. A structure that had taken on outsized presence in the urban landscape — literally and metaphorically — will shape-shift again.
“Inventory has been at record highs, and buyers have had more options,” Wu says. “What’s happening now is that sellers seem to be coming to terms with the fact that there’s record inventory on the market, and unless they reduce prices significantly, it won’t sell.”