No Slowdown in Sight for New Home Construction
The resale market may be absorbing a slowdown, but newly-built homes continue to sell like hot cakes. The new homes market has performed exceptionally well in recent months, and that demand is driving the hottest pace for starts since 2007, reports the Canada Mortgage and Housing Corporation.
The July starts report reveals a total of 217,550 units kicked off last month, up from 215,175 in June, and at an increased pace of 5.5 per cent compared to last year. It’s also the seventh consecutive month new construction has been on the rise according to CMHC Chief Economist Bob Dugan.
“Multiple urban starts” – condos in cities – led the increase in construction, with the greatest activity in Alberta and British Columbia. However, points out Dugan, B.C. continues to experience tight supply conditions while Alberta’s inventory is growing – indicative that it must be managed to avoid over supply.
The Toronto market saw fewer new starts month over month in the condo and detached segments, though general construction levels were close to the annual average. An interesting trend is the strong increase in semi-detached homes and townhouses, a development that highlights the “driving demand for less expensive housing types,” according to the CMHC.
Overall starts in the detached segment fell 19 per cent year over year, as rising prices, along with municipal mandates for more higher-density housing, are contributing to slowing activity.
Montreal Market on the Rise
Things are looking especially rosy in La Belle Provence, as Quebec’s largest city enjoys the benefits of a balanced, yet heating, market. A total of 3,075 homes were sold in July, a 16-per-cent increase from last year, and an eight-month record.
Montreal is on the uptick while Toronto and Vancouver slog through sale declines, says Greater Montreal Real Estate Board President Matheiu Cousineau, because home prices remain a bonafide bargain compared to their western counterparts. For example, the median price of a single-family home is still well below the million mark at $323,000, while condos can be had at a median price of $256,000 – increases of 8 and 2 per cent, respectively.
“For single-family homes, market conditions for resales are increasingly favouring sellers, which explains why price increases have been more sustained in recent months,” Cousineau stated.
Some point to increased foreign interest in Montreal as a contributing factor; unlike Toronto and Vancouver, the city has thus far avoided the implementation of a foreign buyer’s tax. Recent data from the CMHC did find that the proportion of foreign buyers rose 40.7 per cent year over year in June – however, that represents a grand total of 235 buyers, and just 2 per cent of the total market.
Airbnb Barks Back at Report Findings
Airbnb has been marketed as a way for average homeowners to make some extra cash by renting out a portion or all of their home – in fact, their commercials often profile owners who have used the service to “get through tough times”, or even pay their mortgage. However, a new research study challenges that mom n’ pop appeal, finding most of the short-term rental market is run by commercial renters or investors who don’t dwell in their units.
Conducted by the McGill University School of Urban Planning, the report, titled “Short-term Cities: Airbnb’s Impact on Canadian Housing Markets” claims that full-time, entire-home listings account for 6,500 units in the Toronto, Vancouver and Montreal markets, earning up to a third of all revenue. In fact, there has been 100-per-cent growth in these kinds of units between May 2016 – June 2017 in Toronto alone, it reveals.
Whether the short-term rental industry contributes to housing supply shortages in Canada’s hottest markets has been a hotly-debated topic.
Airbnb has since fired back at the findings, telling the Toronto Star that the report purposely positions the data, which was pulled from 2011 – 2016 censuses and CMHC rental numbers, to be misleading.
“The author of this study has a history of manipulating scraped data to misrepresent Airbnb hosts, the vast majority of whom are middle-class Canadian families sharing their homes to earn a bit of additional income to help pay the bills,” said spokesperson Lindsay Scully, adding that only 0.07 per cent of Toronto’s entire housing stock is “rented frequently enough to outcompete a long-term rental.”
Last month, the city introduced new regulations for Airbnb hosts including the “one host, one home” rule, meaning units must be primary residences – no income properties allowed. It also mandates that up to three rooms or an entire house can be listed if the owner lives there permanently. Those changes are expected to impact as many as 3,200 Toronto listings.
Is Toronto’s Loss Canada’s Gain?
Could the recent slowdown in the Toronto real estate market really be a boon for the rest of the nation? A prominent economist believes so, telling BNN that he feels Canada’s economy is becoming more resilient and less dependent on housing as a result.
Said David Rosenberg, chief economist of Gluskin Sheff, in an interview, “We are going through a natural correction in Toronto real estate. I don’t think it’s going to have a deleterious impact on the economy. I think it’s actually going to be a positive development.”
Rosenberg stands firmly in the “bubble” camp on Toronto home valuation, pointing out that it remained financially out of reach for many prior to recent rule changes. In previous Financial System Reviews and rate announcements, the Bank of Canada has expressed concerns that real estate accounts for much of the economy’s strength when other industries should have rotated in, especially in the absence of oil.
“When you think about it, housing is a consumption good, but it doesn’t really add to the productive capacity of the economy,” he said.
Boomers Delaying Moving Out
Older Canadians are choosing to remain in their family homes for decades longer than they used to, according to a data survey compiled by Altus Group. It finds that 71 per cent of the population aged 65 and over are opting to stay in their detached, semi-detached and townhome dwellings, while 27 per cent are in condos or senior / retirement homes.
Boomers who remain in their detached housing have been pointed to as contributing to the supply and price pressure on those home segments; the study finds that while they do eventually make the move to a collective dwelling, they’re waiting until the age of 85 to do so.
