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Wednesday, March 11, 2015

Housing Starts Fall Sharply to Lowest Level Since 2009

Excerpted from The Globe and Mail
Housing starts fall sharply to lowest level since 2009 Add to ...
TAMSIN MCMAHON - REAL ESTATE REPORTER
The Globe and Mail
Published
Last updated






Housing starts plummeted in February to the lowest level since 2009, driven by fewer new condo and multi-residential projects as builders grappled with rising levels of unsold inventory.
Construction of new housing units fell 16 per cent in February to an annualized 156,276, down from 187,025 in January, Canada Mortgage and Housing Corporation said Monday.
It was the lowest level of building activity since July, 2009, said Royal Bank of Canada economist Laura Cooper. Starts fell in eight of 10 provinces, driven by a 25-per-cent drop in construction of new urban multi-residential units, which fell to 86,2014 from 115,123 in January.
Slower construction activity was needed to help developers deal with rising levels of unsold condo units in cities across the country, the housing agency said.
“The declining trend in multiple starts is helping to gradually erode the inventory of completed and unsold units, which is high compared to historical levels," CMHC chief economist Bob Dugan said in a statement.
While record cold temperatures and snowfall last month likely played a role in slowing new construction, many of the warning sights were already there at the start of the year. Developers reported receiving 7.5 per cent fewer building permits in January compared to December, a precursor to housing starts. Home sales also slid in the first months of the year in many markets amid economic uncertainty of lower oil prices.
"We are not entirely surprised to see such a weak number in February given the extremely cold weather, drop in permits and what appeared to us as a questionable boost to starts in the previous month," wrote Toronto-Dominion Bank senior strategist Mazen Issa.
But February's plunge was much deeper than many analysts had expected given that surging housing markets in Toronto and Vancouver were thought to be helping to offset weaknesses elsewhere.
Instead, housing starts fell just 1 per cent February in Alberta and rose slightly in Saskatchewan compared a month earlier, while falling in all markets east of the Prairies.
New home construction fell 53 per cent in Quebec and 35 per cent in Ontario compared to a year earlier, defying expectations that lower interest rates and cheaper gas prices would boost markets outside of oil-dependent Western provinces. Condo construction fell by more than 50 per cent in Toronto, after a near-record wave of completions in February.
Analysts said it was only a matter of time, however, before weaker oil prices put a dent in new home construction in Alberta.
"The oil price shock has yet to fully show up in these data," Bank of Montreal senior economist Robert Kavcic said in a note. "But if recent trends in the resale market are any guide, starts in the oil-producing provinces will be heading lower through 2015."
CMHC said its six-month moving average of housing starts fell for its fifth straight month in February, though it mirrored a similar sharp decline in average starts in February of last year.
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Wednesday, March 4, 2015

Average Cost Of A Detached Home In Toronto Tops $1-million

Excerpted from The Globe and Mail
Average cost of a detached Toronto home tops $1-million Add to ...
Staff
The Globe and Mail
Published
Last updated







The average cost of a detached home topped that mark in Feburary, hitting $1,040,018, the Toronto Real Estate Board said Wednesday.
That marked the first time above $1-million, and an increase of almost 9 per cent from a year earlier, and came as the group reported another surge in both sales and prices last month. 

Sales surged 11.3 per cent to 6,338 from a year earlier, while the average price rose 7.8 per cent to $596,163.
The number of active listings tumbled by 8.7 per cent, which means that “market conditions became tighter, leading to more competition between buyers,” the group said.
Translated, that means bidding wars.
“Even with the record low temperatures last month, we still saw an increase in the number of people purchasing homes in the GTA,” said TREB president Paul Etherington.”
Fortunes are changing across Canada amid the oil slump.
In Calgary, for example, home sales plunged 34 per cent in February from a year earlier.
The tally for January and February in Calgary puts sales “just a shade above the level of activity seen in the same period during the financial crisis in 2009,” said senior economist Robert Kavcic of BMO Nesbitt Burns.
“While growth in new listings has cooled to 9 per cent year over year, the months’ supply continued to rise to a 3 1/2-year high,” he added.
“That has pulled the average transaction price down 4.2 per cent in the past year, partly reflecting the fact that $1-million-plus sales have cratered at twice the rate of sub-$1-million properties.”
Then there’s Vancouver, where sales surged more than 20 per cent in February, and the benchmark price, rather than the average, rose 6.7 per cent to a three-year high, said Mr. Kavcic.
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Monday, March 2, 2015

Toronto Condo Market Booming Again

Excerpted from The Globe and Mail
Toronto’s condo market has rebounded with builders putting the finishing touches on nearly 10,400 new units in January. (MARK BLINCH/REUTERS)

Toronto condo market booming again Add to ...

TAMSIN McMAHON
TORONTO — The Globe and Mail
Published
Last updated
 





After years of slow growth, Toronto’s condo market has come roaring back to life.
Builders were putting the finishing touches on nearly 10,400 new condo units in January, eight times more than the monthly average over the past decade, Bank of Montreal senior economist Sal Guatieri said in a report last week. 
The vast majority of the new condo units have already been sold. Still, the influx of new units has helped push the number of unabsorbed condos – those that have been built but not sold – to a 21-year high.
It is a dramatic rise for a city whose condo market has been at the centre of concerns among federal regulators and international organizations such as Deutsche Bank about rising levels of household debt in Canada.
The latest wave of Toronto condo completions and sales could mark a new upswing after a lull in the market. Sales hit a four-and-a-half year low last fall, while new condo completions had been falling for the past 18 months.
Much of the new supply is the echo of a building boom that began in early 2012, when developers started construction in more than 37,000 new condo units in the city, well above the long-term average of 25,000 units a year.
But the January condo boom also reflects the fact that banks and other lenders are returning to the market, now convinced the city’s condo sector isn’t poised for collapse.
Under pressure in the past from federal regulators, such as former Bank of Canada governor Mark Carney and former finance minister Jim Flaherty, lenders had largely retreated from Toronto’s condo market, working only with well-known developers and often requiring a high number of presales before they would agree to finance construction.
But officials in Ottawa have grown quiet and banks are now eager to fill holes in their loan portfolios, several lenders told a commercial real estate conference last week.
“It’s a very competitive market out there,” Frank Margani, executive vice-president of strategy and development at Fortress Real Developments, told the RealCapital forum. “Portfolios are down and everybody is scrambling to get their piece of the action.’”
Lenders are now willing to finance as much as 75 per cent of the value of a project, up from 70 per cent in recent years, said Chris Milne, vice-president of real estate banking at the Bank of Nova Scotia.
Some have also eased up on their presale requirements, typically asking that developers have buyers for at least 65 per cent of their units, confident that builders will eventually find buyers for unsold units.
“There’s very little walk-away in the market,” Mr. Milne said. “We’re very different from the U.S. People sign with their name.”
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Wednesday, February 4, 2015

Toronto Housing Market Gets Off To a Surging Start..

Excerpted from The Globe and Mail

Toronto’s housing market gets off to surging start in 2015

TAMSIN MCMAHON - REAL ESTATE REPORTER
The Globe and Mail
Published
Last updated



 
Economists largely predicted that Toronto’s housing market would be the main winner from the downturn in oil prices and rock-bottom interest rates and so far the region’s housing market is proving them right.

Home sales in the Greater Toronto Area rose 6.1 per cent in January compared to a year earlier, according to new figures from the Toronto Real Estate Board. Average prices jumped 4.9 per cent even as the region saw a spike in new listings, which rose 9.5 per cent compared to a year earlier.
The growth was driven mainly by sales in the outside of the city. Sales of detached and semi-detached houses in Toronto dropped more than 2 per cent, while sales of townhouses fell nearly 10 per cent. Only condo sales saw a yearly gain of 6 per cent.

January buyers instead flocked to the suburbs, sending sales of condos soaring 23 per cent, while detached home sales jumped 10 per cent. The shift is almost certainly driven by affordability as the average detached home in Toronto sold for nearly $950,000 in January compared to $650,000 outside the city.

It’s the second month of strong growth for the region’s housing market even as winter is considered the slowest time of year for home sales. December sales rose by nearly 10 per cent compared to a year earlier while average prices were up 7 per cent.

Despite a strong start to the housing market, Toronto is feeling the effects of the broader economic uncertainty from falling oil prices and the plummeting loonie. The amount of industrial space leased in the region dropped 25 per cent in January compared to the same time last year, while leased office space fell 3.3 per cent. The sales price of most commercial buildings also dropped across the region, with industrial prices falling 40 per cent to $80 per sq. ft.

“On the one hand, we have the potential for the drop in oil prices to impact the Canadian economy as a whole,” Toronto Real Estate Board president Paul Etherington said in a statement. “On the other hand, we have the potential positive impacts of the lower Canadian dollar on exports from southern Ontario. As we move toward the spring, we should have a better indication of the net effects on commercial real estate markets in the GTA.”
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Friday, January 23, 2015

Mortgage Brokers See Record-low Rates Coming

Excerpted from The Globe and Mail
As banks hold off on cuts, brokers see record-low mortgage rates Add to ...
TAMSIN McMAHON - REAL ESTATE REPORTER
The Globe and Mail (includes correction)
Published
Last updated
  
Canada’s major lenders are so far holding off cutting mortgage rates in the wake of the Bank of Canada’s quarter-point interest rate cut, but industry officials predict rates will fall to historic new lows just in time for the all-important spring housing market.
Toronto-Dominion Bank said it is not planning to lower its prime rate following the central bank’s decision. Both Royal Bank of Canada and Canadian Imperial Bank of Commerce said Thursday they were reviewing their rates in light of a lower overnight rate. 
“Spring is around the corner and market-share battles will start to heat up,” said Vince Gaetano of Mortgagemonster.ca. “The first bank to make that change, it’s going to be huge from a market-share perspective.
“Someone will blink and that will probably lead everybody down the same path.”
Some small non-bank lenders have already begun cutting their fixed-mortgage offerings, said Drew Donaldson, a mortgage broker and executive vice-president Safebridge Financial Group. Consumers with variable-rate mortgages and preapprovals have been calling Mr. Donaldson’s office in droves looking to find out when their rates might drop.
In the past, when rates were high and lenders could expect wide margins on their mortgage businesses, the major banks would quickly follow on the heels of a Bank of Canada rate movement.
But with bond yields and interest rates plummeting to new lows and lenders facing a host of new regulatory requirements in the aftermath of the global financial crisis, banks have become far more reluctant to slash rates, mortgage planner Robert McLister said.
Banks will likely wait until the end of the fiscal quarter on Jan. 31, after a large share of homeowners have refinanced their mortgages, to slash rates in order to protect their profits, Mr. Gaetano said.
Some industry officials say that while banks will inevitably be forced to drop their fixed mortgage rates if bond yields settle at record lows, they may put off dropping their prime rate, which affects variable-rate mortgages along with a host of non-mortgage lending, such as car loans and personal lines of credit, in order to protect their non-mortgage profits and push borrowers toward longer-term fixed rate mortgage contracts.
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Tuesday, January 20, 2015

Disparity Between Prices of Houses and Condos in the GTA

Excerpted from The Globe and Mail
Price gap between Toronto houses, condos hits record high Add to ...
TAMSIN MCMAHON - REAL ESTATE REPORTER
The Globe and Mail
Published
Last updated




 
The growing price gap between condominiums and houses hit a record high last year in the Toronto area, as the market saw a huge jump in the number of newly built condos and buyers battled over a persistent shortage of houses.
The average price of a low-rise home in the Toronto area hit $705,813 in 2014, up 8 per cent from the year before, while the average price of a high-rise unit rose just 4 per cent to $454,476, according to new data from real estate research firm RealNet Canada Inc. and the Building Industry and Land Development Association.

  


The growing price divide comes as developers have been under pressure to shrink the size of new condo units to keep costs down, while an insatiable appetite for houses, coupled with a shortage of supply, has driven up the cost of low-rise development.
“It’s creating a bit of an extremity condition in the market,” said RealNet president George Carras. “Living in a ground-oriented home is really becoming further and further out of reach.”
The story is largely one of government policy, not of low interest rates and easy credit, Carras says. Provincial intensification and land-use policies have limited new development in the greenbelt around the Greater Toronto Area and encouraged more density, helping to drive up the price of new homes and increase the supply of new condos. Last year saw a near-record number of 25,571 condo completions in the region, up from about 16,668 the year before.
While much of the jump in condo development is concentrated in the downtown Toronto core, the price gap between the two forms of housing has been spilling outward into suburbs like Mississauga and Vaughan, where detached homes can sell for as much as $1-million and a shortage of available land has also driven development toward high-rise projects.
Despite the growing price disparity, 2014 was a good year for sales of both houses and condos, with house sales jumping 46 per cent to 17,745 and condo sales up 38 per cent to 21,991. After years of shrinking condos, the average unit size increased slightly last year, from 796 to 816 square feet. The average price per square foot jumped 2 per cent to $557. Condo developers also shifted back toward building more two-bedroom condos after years of building mainly one-bedroom units. The proportion of new condos that were two bedrooms rose from 31 per cent in 2013 to 40 per cent last year, while one-bedroom units fell from 61 per cent to 48 per cent.
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Tuesday, January 6, 2015

Suggested Uses Of Your Gas Savings

Excerpted from The Globe and Mail
ROB CARRICK

Five ways to use your gas savings wisely Add to ...

Rob Carrick
The Globe and Mail
Published
Last updated





Falling gasoline prices offer a chance for some personal finance redemption in 2015.
As a country of confirmed borrowers, we need it. It’s now obvious that as long as interest rates stay low, Canadians will continue to wallow in debt.

For every good bit of news on debt, there’s an offsetting piece of bad news. We’ve seen data showing people are smartly paying down their mortgages, but also a surge in car loans. Bottom line, the ratio of debt to household income was at record highs in the third quarter of 2014.
 
Thanks to falling gas prices, you’re saving money every time you fill up your car or truck. But are you actually saving it, or are you spending it like found money? It’s by putting our gas savings in an emergency fund, a retirement fund or a child’s registered education savings plan that we redeem our borrowing excesses. Spending the money on a better cable package or more restaurant dining is a blown opportunity.

BMO Capital Markets economist Sal Guatieri estimates that households would save almost $1,000 a year if the 35-cent-per-litre decline in gas prices over the second half of 2014 is sustained. It very likely won’t be. The decline seems too extreme for it not to be reversed to at least some extent. So let’s figure on a little more than half that level of saving on gas for next year, or $600 a household.
That’s $50 a month, which sounds puny. But at a time when debt levels keep expanding, a lot of us need to make even a modest attempt to do better as savers. Here are some ways to use your savings on gas, starting with the most urgent:


1.) Eliminate your credit card balance
When you’re paying interest rates of close to 20 per cent on a card balance, hammering it down to zero is your top financial priority, period. Forget about investing in tax-free savings accounts and registered retirement savings plans. There’s no way you generate returns in them that are even close to what you’re paying on card interest.

2.) Build your safety net
We need a new phrase to replace “emergency fund,” which sounds too vague and old-fashioned. A safety-net fund covers any unplanned expenses that you can’t cover out of your regular household cash flow. Think of expenses ranging from the ordinary – you unexpectedly need new tires for the car – to catastrophic events such as a job loss or major illness. Having $600 in your emergency fund one year from now may not be a difference maker, but it’s a good start. Guarantee: You will never say, “Damn, I wish I didn’t save that $600.”

3.) Build a registered retirement education savings plan
RESPs are Canada’s most neglected savings vehicle. In the Yconic/Abacus poll of millennials that was widely covered by The Globe last spring, just 46 per cent of participants said their parents used RESPs. Parents, today’s tough job market for young people makes it harder than ever to get student loans repaid in a timely manner. Help minimize those debts by investing in an RESP. A $600 RESP contribution over a year would generate $120 in matching federal grant money. That’s enough to cover books and supplies for at least one semester of university or college.

4.) Save for a house
Retirement saving would ideally appear in this slot, but people in their 20s and early 30s won’t get into big city housing markets unless they bring all their savings power to bear on a down payment (let’s assume student debts are fully repaid). Saving an extra $600 annually for a few years will help you borrow a little less on your mortgage and thus reduce the amount of interest you pay over the course of your mortgage.

5.) Retirement
Here’s where that $600 a year amount starts to really add up. Over 20 years, annual contributions of that amount would be worth $20,832, assuming an average 5-per-cent growth rate.

For the past several years, Canadians have been finding room in their budgets to increase borrowing above and beyond the amount that their incomes are rising. It seems hopeless getting Canadians to carve out room for saving, but fortunately we don’t have to as a result of falling gasoline prices. Take advantage and redeem your finances in 2015.
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