WEEKLY RESIDENTIAL MARKET UPDATE
Industry & Market Highlights
Report on the Housing and Mortgage Market in Canada
Mortgage Professionals Canada creates in-depth consumer reports to provide a better understanding of Canada’s housing market, identifying patterns in consumer behaviour, providing a snapshot of who the Canadian homebuyer is, and presenting data to provide both macro and micro analysis of where the residential mortgage market is headed.
New government policies are causing consumers to have a more negative outlook on housing and real estate in Canada, according to our newly released Report on the Housing and Mortgage Market in Canada.
While there is still broad agreement among consumers that real estate remains a good investment, the overall strength of consumer sentiment has been weakened by increasing interest rates and the new rules making it harder for homebuyers to secure mortgage financing.
The report suggests that some first-time buyers are finding ways to supplement their down payment with help from their parents. This is benefiting those fortunate to have family who have the financial means to assist them, but it is leaving a lot of middle-class Canadians behind. More and more young people are grasping the reality that they may never own a home.
With an increasing concern on income and wealth inequality, current policies that create a permanent generation of middle-class renters could increase wealth inequality as the ability to own homes and generate long-term equity becomes more and more difficult.
In addition, the report showcases that although the market is behaving the way it should in response to actual economic conditions, homebuying trends have been disrupted by stress tests. There has been a significant impact on supply and demand in almost every region of the country.
In Toronto and Vancouver, the weakened market has been seen as a welcome change, though elsewhere in the country it has proven to be more unstable, where conditions were already soft, and price stability is being replaced by price erosion. Read the full report HERE. By Mortgage Professionals Canada
Residential Market Commentary – An easing burden of debt
The good news is: the Canadian household debt to disposable income ratio is shrinking.
The latest numbers from Statistics Canada put debt to income at 168%, or $1.68 owing for every dollar available to spend, as of the end of the first quarter this year. That is down from 170% in Q3 and 169.7% in Q4 of last year.
Credit market debt rose by just 0.3% in Q1, while wages rose 1.3%. Compared to the 4th quarter last year, mortgage borrowing declined by $2 billion to $13.7 billion in Q1, 2018.
The Bank of Canada sees it as a good sign, but Governor Stephen Poloz is quick to point out that Canadians are still carrying more than $2 trillion in household debt, and it will take some time before that debt load stops being a key concern.
While the Bank is keeping a close watch on how Canadians are responding to rising interest rates, the easing of the debt burden does allow room for further rate increases. By First National Financial
Q2 Housing Market Data Now Available
Get national and provincial housing market information for the second quarter, including resale market data, housing starts, employment trends and interests rates, from the latest Housing Market Digests. Mortgage Professionals Canada and its Chief Economist Will Dunning produce monthly Housing Market Digests to provide a snapshot and trend analysis of the Canadian – and respective regional – housing markets, content that includes information around housing starts, the resale market, employment trends, interest rates, and more. View the full reports by selecting below.
Major markets are vulnerable: CMHC
A quarterly report from Canada Mortgage and Housing Corporation warns that Toronto and Vancouver are susceptible to corrections in the market.
“Housing markets for Vancouver, Toronto, Victoria and Hamilton remain highly vulnerable because of the detection of acceleration and overvaluation,” said Bob Dugan, CMHC’s Chief Economist, during a teleconference with reporters. “Most notably, high evidence of overvaluation is still observed in Vancouver, Victoria and Toronto, where house prices remain higher than levels supported by economic fundamentals.”
Prices are decreasing in the higher end of Vancouver’s luxury market, however, demand remains robust for everything below $1mln.
“Overall, the main story in Vancouver is we do continue to detect overvaluation,” said Eric Bond, a regional senior market analyst with CMHC. “We have price levels that are far higher than the upper predicted values from our price models.
“Nonetheless, we do observe a broad-based cooling in the Vancouver market. It’s become quite imbalanced between different sectors and geographies, where you have high demand and low inventories for properties under $1mln that are more affordable in the region.”
The national market has been vulnerable since mid-2016, but Dugan added that, while still early, there are signs of cooling.
“The assessment of the degree of vulnerability from the HMA [Housing Market Assessment] has been stable in recent quarters,” said Dugan. “Results continue to flag a high degree of overall vulnerability for the housing market at the national level for the eighth straight quarter. The rating is the result of detection of moderate evidence of overvaluation and price acceleration. Despite the stability in these results, we know the trends in overvaluation and price acceleration have been moving in such a way that suggests these vulnerabilities are gradually dissipating.”
Without a doubt, the dissipation is a direct result of the government’s intervention in the housing market. According to Mortgage Professionals Canada’s Report on the Housing and Mortgage Market in Canada, the stress test is being felt from coast to coast.
“We support a stress test, albeit at a reduced rate of 0.75%, as it is a useful tool to test a borrower’s ability to make future payments,” said Paul Taylor, MPC’s president and CEO. “However, the cumulative impact of rising rates, a 2% or greater stress test, provincial government rules in Ontario and British Columbia, and further lending restrictions are negatively suppressing housing activity not just in Toronto and Vancouver, but throughout the country.” By Neil Sharma.
LSTAR’s News Release for July 2018 – July Home Sales Reflect Robust Summer Season
London and St Thomas Association of REALTORS® (LSTAR) announced 1,000 homes* were sold in July, down 1.8% over the same time last year. July 2018 marked the third best July for home resales since the Association began tracking sales data in 1978.
“The numbers tell us we’re experiencing a very healthy summer for home resales,” said Jeff Nethercott, 2018 LSTAR President. “This is the third consecutive month of at least 1,000 homes being sold and the resale activity remains above the 10-year average. Inventory remains at a 10-year low, while we continue to see an increase in average sales price.”
By geographic area, London East continues to make the largest gains, with the average July sales price at $288,648 up 14.3% from July 2017 and up 40.2% compared to July 2015. The average sales price in London North was $441,035 up 8.0% from July 2017 and up 35.9% compared to July 2015. Meanwhile, the average sales price in London South was $370,399, up 10.9 percent from July 2017 and up 32.2% from July 2015.
Overall, the average July sales price across London and St. Thomas was $360,068 up 10.3% from July 2017 and up 34.2% from July 2015. Going back further, it’s a 68.2% increase compared to the average sales price 10 years ago.
“One of the biggest trends in 2018 is the lack of inventory,” Nethercott said. “In July, there were 1,721 active listings, down 10.9% from this time last year and down 55% from July 2015. The sales-to-new listings ratio was 78.9%, which the Canadian Real Estate Association (CREA) says represents conditions in the marketplace that favour sellers (a ratio between 40% and 60% is generally consistent with a balanced market). In London East, the sales-to-new listings ratio was 89.1%, while in London South it was 81%.”
St. Thomas saw a total of 79 homes sold in July, down 7.1% from the same period last year. For inventory, there were 87 active listings, down 22.3% from last July and down 67% from July 2015. The average home sales price in St. Thomas was $303,988 up 15.9% from July 2017 and up 35.5% from July 2015.
The following chart is based on data taken from the CREA National MLS® Report for June 2018 (the latest CREA statistics available). It provides a snapshot of how average home prices in London and St. Thomas compare to other major Ontario and Canadian centres.
According to a research report1, one job is created for every three real estate transactions and approximately $53,000 in ancillary spending is generated each time a home changes hands in Ontario. “The business of real estate affects all of us, with huge impact to the local economy, generating potentially more than $53 million in July,” Nethercott said. “The home resales have helped create approximately 333 jobs, making a significant contribution to the well-being and quality of life for the communities of London and St. Thomas.”
The London and St. Thomas Association of REALTORS® (LSTAR) exists to provide its REALTOR® Members with the support and tools they need to succeed in their profession. LSTAR is one of Canada’s 15 largest real estate associations, representing over 1,700 REALTORS® working in Middlesex and Elgin Counties, a trading area of 500,000 residents. LSTAR adheres to a Quality of Life philosophy, supporting growth that fosters economic vitality, provides housing opportunities, respects the environment and builds good communities and safe neighbourhoods and is a proud participant in the REALTORS Care Foundation’s Every REALTOR™ Campaign.
*These statistics are prepared for LSTAR by the Canadian Real Estate Association (CREA) and represent a data snapshot taken on August 1, 2018, based on processed home sales activity between July 1 and 31, 2018.
Condos remain dominant in GTA new homes market
The GTA new homes market is still all about condos even as prices rise while single-family home prices ease.
There were 2,500 new home sales in June and 2,079 of them were condo apartments in low, medium and high-rise buildings, stacked townhouses and loft units according to Altus Group data.
The Building Industry and Land Development Association (BILD) says that the sales were 61% below June 2017 which posted a record-high 5,290 new condo sales. However, June 2018 sales were only 17% below the 10-year average.
Meanwhile, the benchmark price of new GTA condos was up 23.5% year-over-year to $774,554.
For single-family homes, sales were down 19% from June 2017 with 421 units sold, 71% below the 10-year average. The benchmark price was down 9.4% year-over-year to $1,132,957.
“The relative strength of condo apartment sales is an indication of the state of the market,” said David Wilkes, BILD President and CEO. “The cost of new homes in the GTA, both condos and single-family homes, is affected by government regulation and red tape that slows down the building of new supply, and by government fees, taxes and charges, which can account for almost a quarter of the cost of a new home.”
Inventory increases for condos, single-family
New condo openings mean that inventory in June was up to 10,225 units while single-family home inventory also increased slightly to 4,848 units.
“The industry and buyers continue to focus on the relatively more affordable condominium apartment sector,” said Patricia Arsenault, Altus Group’s Executive Vice-President, Research Consulting Services. “Fourteen new condominium apartment projects were launched in the GTA last month, the second highest number for June yet recorded by Altus Group, and buyers snapped up almost half of the new units by month-end. In a typical June, closer to one-third of new units are sold by month-end.” By Steve Randall.
Mortgage Interest Rates
Prime lending rate is 3.7%. Bank of Canada Benchmark Qualifying rate for mortgage approval is at 5.34%. Fixed rates are holding steady, no change in fixed rates. Deep discounts are offered by some lenders for variable rates making adjustable variable rate mortgages very attractive.
 |
| Terms | Posted
Rates |
Payment
Per $100k |
Our Rates | Payment
Per $100k |
Savings |
| 6 Months | 3.14% | $480.46 | 3.10% | $478.39 | $2.07 |
| 1 Year | 3.04% | $475.30 | 2.99% | $472.73 | $2.57 |
| 2 Years | 3.44% | $496.11 | 3.24% | $485.65 | $10.46 |
| 3 Years | 3.59% | $504.03 | 3.39% | $493.48 | $10.55 |
| 4 Years | 3.89% | $520.07 | 3.54% | $501.38 | $18.69 |
| 5 Years | 5.59% | $615.64 | 3.29% | $488.25 | $127.39 |
| 7 Years | 5.80% | $627.97 | 3.94% | $522.77 | $105.19 |
| 10 Years | 6.10% | $645.76 | 3.99% | $525.48 | $120.28 |
| Variable | 2.7% | $457.99 | 2.70% | $457.99 | $0.00 |
| Prime Rate | 3.70% | ||||
| This edition of the Weekly Rate Minder shows the latest rates available for Canadian mortgages. At Dominion Lending Centres, we work on your behalf to find the best possible mortgage to suit your needs.
Explore mortgage scenarios using helpful calculators on my website: http://www.iMortgageBroker.ca |
Other Industry News & Insights
Remote working impacting real estate
The telecommuting revolution envisioned by futurists, in which vast numbers of workers eschew their daily commute in favour of working remotely from home, never quite turned out as predicted.
However, a growing number of Canadians are taking the term “working remotely” literally, leaving the hustle and bustle of city life behind to work from their cottage or winter home down south, says a real estate expert.
“To the extent that that expands further, I think it will further enable the larger trend of working from places that you like,” said Brad Henderson, president and CEO of Sotheby’s International.
For many, that means avoiding the summer commute to cottage country.
“My place of pleasure is in Naples, Fla., not even in my country,” he said in an interview.
It is especially suited for consultants and senior executives with the flexibility to work remotely from anywhere with little need to visit a corporate office, said Henderson.
Many are choosing to take their profits from selling their home in the city and relocating to a property near a lake while perhaps maintaining a condo in the city.
He’s seen interest across the country from Montrealers relocating to the Laurentians or Eastern Townships, Torontonians heading to Muskoka, Collingwood and the Kawarthas and western Canadians choosing Banff, Canmore, Whistler and Kelowna.
When Vancouver home prices were especially crazy, Henderson said there was a trend of people selling and moving to Victoria.
“They could telecommute for most of what they needed and if they really needed to be in Vancouver, it’s a half an hour helicopter ride from harbour to harbour.”
Chris Van Lierop and his husband and business partner, Tim Wisener, took it a step further by relocating their home and design business to Fenelon Falls in Ontario’s Kawartha Lakes area.
The pair has changed their focus from designing city homes to helping city folks build cottage retreats.
They made the move last September after constantly prolonging the time they spent at the cottage.
“Eventually we just decided that we think we can make a go of our business up here and why not just stay at the cottage,” he said.
Internet service can be a challenge when they visit clients in areas where signals are harder to come by.
It’s the number one issue people ask about when planning to work from a cottage, says Jim Pine, chief administrative officer of Hastings County and co-lead on the non-profit Eastern Ontario Regional Network.
The network has spent $175 million to upgrade service in Eastern Ontario and is working on further changes to reach more homes and improve access and speeds.
“There’s still areas where there are challenges for people to either get a line of sight signal even on satellite. When you’ve got trees and stuff in the way, it makes it a bit of a challenge.”
Enticing people to conduct their business from the cottage is a way to ensure more services are available in rural areas by increasing tax revenues, said Denise Williams, acting manager of economic development for the city of Kawartha Lakes.
Rural communities need to attract new people to open businesses and provide the local services required to maintain a quality of life, said Terry Rees, executive director of the Federation of Ontario Cottagers’ Associations.
“There’s a ton of small businesses in rural Ontario that have no transition plan and no succession plan and many of them are in the sunsetting kind of phase and that’s got to be worrisome to everyone who’s concerned about the rural economy across Canada,” he said.
The federation recently sponsored a survey that found that 28 per cent of respondents currently work from their waterfront communities. Nine per cent work remotely full-time and 70 per cent do so occasionally.
Of those who don’t work from their waterfront communities, 37.5 per cent would consider doing so.
The three largest barriers they identified were access and cost of internet service, distance to clients and the lack of social infrastructure.
About one million of Canada’s 12.6 million households owns a second home.
Statistics Canada doesn’t track the number of people working from their cottages, but the share of non-farming Canadians working at home has remain unchanged since 1996 at just over six per cent.
Realtor Dean Michel moved with his young family to a family owned cottage because he was tired of the “Toronto rat race.”
“I thought if I can make it work up here, then I’m going to do it,” he said.
Michel said moving to the tranquility of the cottage is part of a societal shift for those near retirees or retirees.
“They just look at the end of their life and say, ‘I’ve got 20 to 30 years left or whatever, do I want to spend it in the rat race?” By The Canadian Press.
Why Canadian Millennials have another to resent Baby Boomers
First Canadian baby boomers reaped the benefit from one of the biggest housing-price increases in the country’s history. Now they’re driving up the cost of a country retreat, leaving millennials struggling yet again to get a foothold on the property ladder.
Prices of ski chalets, waterfront cottages and other vacation properties in Canada jumped 13% to a median $460,531 in the 12 months through June, according to brokerage RE/MAX Integra in a report on Thursday.
“Baby boomers who are entering their retirement, bought homes 30, 25-plus years ago, paid them off, and have gained tons of equity and are taking that equity out and buying second homes or are just selling their primary homes all together and buying a recreational property to retire at full time,” Christopher Alexander, executive vice president at real estate firm Re/Max Integra, said in an interview.
British Columbia had the biggest jump in prices among the provinces at 19%, with the cost of a waterfront property in Tofino soaring as much as 112% to $1.4m and 21% in the ski resort of Whistler to $790,000. In Ontario, prices jumped by 15%, with a waterfront spread in Wasaga Beach rising 18% to $950,000.
Prices on the Prairies by contrast fell 4% from the previous year amid an economic slowdown and the harsher impact of tighter mortgage-lending rules. Atlantic Canada prices remained flat.
Benchmark home prices jumped 46% to $637,500 in the five years through May, propelled by an 81% gain in Vancouver to $1.09m and rose 63% in Toronto to $772,400. By Bloomberg.
Roundup of the latest mortgage and housing news.
From Mortgage Professionals Canada.
- Buyers Return to Toronto’s Housing Market (Bloomberg)
- Toronto home sales surge 18.6% as summer demand heats up (BNN Bloomberg)
- Vancouver home sales sink to worst July since 2000 (BNN Bloomberg)
- Should Canadians be worried about the housing market’s effect on the economy? Experts weigh in (Livabl)
- Vancouver’s homes may be costly to buy, but they’re cheap to own (Vancouver Sun)
- Young Canadians are Giving Up on Home Ownership (Vice)
- Why detached home prices are falling in these Metro Vancouver areas (Livabl)
- Government intervention hurts housing markets (Calgary Sun)
- Canada Risks Creating ‘A Permanent Generation Of Middle-Class Renters’: Industry Group (Huffington Post) – featuring Mortgage Professionals Canada research report
- Calgary’s housing market takes step in right direction with declining vacancy rate (Livabl)
- Chinese investors are still attracted to Canada’s housing market — here’s why (Livabl)
- These 3 groups of homebuyers are causing condo prices to soar in Greater Vancouver (Livabl)
- New low-rise home sales drop 19%, as demand for condos rises (Livabl)
- 4 cities are keeping Canada’s housing market in “highly vulnerable” territory (Livabl)
- Stress Test Impacts Measured (CMT)
- Canada’s housing sector faces high degree of instability for eighth quarter: CMHC (Vancouver Sun)
- Housing market improving in Hamilton: CMHC (Global)
- 60% of Canadians cut back spending amid rising rates: Poll (BNN)
- Over half of BC residents say government is doing a bad job handling housing affordability crisis (Livabl)
- Canadian residential renovation spending hit $78 billion in 2017 — here’s what it means for the housing market (Livabl)
- Housing intervention creating permanent generation of renters, association warns (BNN)
- Mortgage stress test has prevented 18% of Canadian homebuyers from purchasing the home they want (Livabl)
- Federal policies limiting housing activity: report (Remi)
- Industry Association Blames Government Policies For Weakening Canada’s Housing Market (Baystreet.ca)
- Mortgage stress test suppressing housing activity, says report (Troy Media)
- Here’s how a boom in tech jobs could affect the GTA housing market (Livabl)
- Inflation at a 6-year high is bad news for the Canadian housing market (Livabl)
Now’s the perfect time of year for a free mortgage check-up. With rates on the rise, it makes sense for us to revisit your mortgage and ensure it still meets your needs. Perhaps you’ve been thinking about refinancing to consolidate debt, purchasing a rental or vacation property, or you simply want to take a vacation. Whatever your needs, we can evaluate your situation and help you determine what’s right for you.
Adriaan Driessen
Mortgage Broker
Dominion Lending Forest City Funding 10671
Cell: 519.777.9374
Fax: 519.518.1081
415 Wharncliffe Road South
London, ON, N6J 2M3
Adriaan Driessen
Sales Representative & Partner
PC275 Realty Brokerage
Cell: 519.777.9374
Fax: 519.518.1081
415 Wharncliffe Road South
London, ON, N6J 2M3