Just when you think you have the Canadian real estate market pegged, the data shifts gears and reveals a surprise change in direction. The narrative has changed from talk of unsustainable price growth to the first signs of a softer market – while reports of condo board fraud and alt. lender drama kept real estate followers on the edge of their seats. Read on for the top headline highlights from May.
May 3: TREB Reveals April Listings Flood
Too few listings have taken the blame for rising real estate prices in the Greater Toronto Area – but data from the Toronto Real Estate Board reveal the trend of tight supply is starting to reverse, as 33 per cent more listings came to market in April. There were 21,630 active listings at month end, with the vast majority found in the low rise segment, indicating the market is reacting to the Ontario Fair Housing Plan implemented on April 20. Sales also dipped 3.2 per cent, year over year.
While a boost in homes for sale is great news for exasperated Toronto real estate buyers, there’s still no relief for prices, which were up 31.7 per cent to $920,791 from April 2016.
“The fact that we experienced extremely strong growth in new listings in April means that buyers benefitted from considerably more choice in the marketplace,” said Larry Cerqua, TREB president and CEO. “It is too early to tell whether the increase in new listings was simply due to households reacting to the strong double-digit price growth reported over the past year, or if some of the increase was also a reaction to the Ontario government’s recently announced Fair Housing Plan.
“It will likely take a number of months to unwind the substantial pent-up demand that has built over the past two years.” He adds buyers and sellers can expect to see annual price growth to remain much higher than that of inflation, especially as the market enters the spring and summer real estate season.
May 11: Price Spillover in Vancouver
Data from the Canada Mortgage and Housing Corporation reports that the Vancouver “Spillover Effect” – aka rising home prices – is being felt in housing markets as far away as Kelowna and interior B.C. Similar to the rising home values in far-flung GTA communities (it was revealed Toronto is causing prices to rise in cities as far as Niagara), higher prices further out is a symptom of a market that has experienced hot conditions over the long term.
“The spillover effect only becomes fully realized over a long period of time, such as five years or more, for most communities in British Columbia,” states the report, which finds prices in Kelowna are 0.5 per cent higher than they would have been otherwise.
May 12: Hysteria Grows Around Home Capital
Media and consumer scrutiny is intensifying on Home Capital Group, as the alternative mortgage lender is rumoured to be considering the sale of its mortgage assets to pay back the $2-billion loan it procured from the Healthcare of Ontario Pension Plan.
The debt has been taken out to offset a run on both Home’s stock and deposits – 90 per cent of funds have been withdrawn from its consumer savings branch, following the Ontario Security Commissions crack down, and ousting of CEO Martin Reid.
May 14: Who’s Really On Your Condo Board?
Who’s calling the financial shots at your condo? A CBC News Toronto investigation reveals troubling allegations of proxy fraud and contractor kickbacks conducted by a trio of three men who, collectively, have held positions on no fewer than six condo boards in downtown Toronto.
In addition to gaining control of the boards by either running themselves, or positioning associates for election, the three are also speculated to have ousted existing property management companies in favour of contracts they may have personal or business connections to – a potential breach of the fiduciary duty held by board members to act in the best financial interest of the condo corporation.
The series also raises awareness around the need for condo owners to be proactive and to do their due diligence in the election of their boards, and to be aware of their options when seeking to replace a less-than-desirable board.
May 15: CREA Reports National Sales Downturn
Home sales are down in two thirds of markets across the country, reports the Canadian Real Estate Board, led by a 6.7 per cent decline in the GTA, and down by 1.7 per cent nationally. CREA also reports fewer bidding wars experienced by buyers; while homes are still fetching hefty sale prices, with the average up 10.4 per cent year over year to $559,317, they’re going for less over asking than before. The national agency concludes that with the GTA and Greater Vancouver Area stripped out, $150,000 would be knocked off the national average price.
May 16: The Guac Hits the Fan
Steep home prices, crippling student debt, and weak employment are all challenges facing cash strapped millennials – but the real reason they can’t break into the housing market stems from their brunching habits, spews an Australian millionaire.
“When I was trying to buy my first home, I wasn’t buying smashed avocados for $19 and four coffees at $4 each,” said property tycoon Tim Gurner to 60 Minutes Australia. “We’re at a point now where the expectations of younger people are very, very high.”
#Avocadotoast soon trended worldwide as the Twitterverse saw red, with thousands commenting on the blatant disconnect between Gurner’s comments and their own financial realities. Calculators to determine the price of homes in avocado toast were promptly released, including this one which concludes it would take 48 years of sacrificed breakfasts to purchase the average home in Vancouver.
May 18: Census Opens Up on Empty Homes
Investors who purchase homes and leave them standing empty have been vilified as a contributor to unsustainable housing prices in Canada – but new numbers from the 2016 Census shed more light on what dwellings actually remain unoccupied.
Is 30-plus-per cent annual house price growth in the GTA largely down to foreign buyers, or is that a complete red herring? The truth, according to Statistics Canada, is somewhere in between, as analyst Jeff Randle explains.
“In February we released a total count of the private dwelling stock and a count of the private dwellings that are occupied by usual residents,” he says. “The remainder between these two is something that has been misused to count the vacant dwelling stock.”
“In a place like Toronto where there are many educational institutions, you would be more likely to find these types of situations,” he says. “You can compute the usual resident occupancy rate, and in the Toronto that is 95 per cent, which is higher than all the other major urban centres in Canada.”
May 23: 10% Is All It Would Take
Canadians have enjoyed record low mortgage rates for years as a result of lender discounting and loose monetary policy from the Bank of Canada – but they may be too dependent on them in order to afford their homes, finds a report from Manulife. The lender reveals that three quarters of survey respondents said they’d have difficulty paying off their mortgage should their payments rise by 10 per cent.
It’s a position made all the more precarious by the fact that a 1-per-cent increase from the central bank is all it would take to hike borrowing costs said Manulife CEO Rick Lunny. “What these people don’t realize is that we’re at record low interest rates today. When you put it into that context, they’re not really prepared for what is inevitable. Sooner or later, interest rates are going to rise.”
May 24: Bank of Canada Rate Announcement
Speaking of the Home Capital media crisis and the impact of rising interest rates, the central bank deigned to mention either in its May interest rate announcement, in which it left the cost of borrowing at 0.5 per cent. The BoC stayed mum on the alternative lenders’ challenges and whether they posed a risk to the overall economy, despite calls from CIBC Chief Economist Benjamin Tal for Governor Stephen Poloz to acknowledge it, and soothe investor anxiety.
The BoC also revealed inflation is not quite up to speed and not anticipated to reach capacity until 2018, as weak food and retail data offset the “absorbed” effect of oil and improved business investment. As a result, the BoC’s Overnight Lending Rate isn’t expected to change until next year at the earliest.
May 24: New Builds Flying Off the Shelf
Despite the slowdown seen in the resale segment, demand remained ferocious for newly-built homes in April, according to BILD. A total of 4,680 new homes were sold during the month, up 7 per cent year over year. By month end, less than 10,000 units remained in inventory – the lowest level ever in the 10 years BILD, and its research partner Altus Data – have monitored activity. During the first four months of the year, 17,977 homes changed hands.
“Builders are not able to keep up with the demand for new housing. The product that builders are able to bring to the market is quickly purchased and prices for all types of new homes keep increasing as a result,” said BILD president and CEO Bryan Tuckey.
May 25: Missing: Ontario’s Gentle Density
The real reason behind the GTA’s housing woes isn’t a shortage of housing – it’s accessibility to the right kind of housing, reveals a report by the Canadian Centre for Economic Analysis. They find that Ontario is suffering from a lack of “gentle density” or a “missing middle”, referring to home types such as townhouses, row houses, and walk-up courtyard apartments. As a result, the province is both over and under housed, and facing the need to spend $150 billion over the next decade to property meet Ontarians’ housing needs.
May 29: “CrackHouse” Reno Leads to Classist Fury
“We Bought a Crack House” – a Toronto Life feature intended to chronicle the challenges of renovating a heritage home – has incited social-media fury and become the posterchild for the city’s housing haves versus have-nots. Readers were quick to condemn the piece, written as a first-hand account by author Catherine Jheon, for perceived classist overtones and trivialization of the housing needs of Parkdale’s most vulnerable – not to mention sneers over the familys’ reno follies, which included spending “half a million dollars” on a home sight unseen, and hiring an unqualified (and underpants-less) contractor off the street.
Lessons learned: always view the property before making an offer, thoroughly check contractor references, and have a backup financial plan that doesn’t rely on a rich English godfather bailing you out.