Steady and Healthy Momentum

For the most part, economists are expecting the national prices to maintain a healthy momentum.  Lower gains over previous years will be realized with the exceptions of Calgary, Edmonton, Toronto and Vancouver.

Housing starts experienced the slowest year since 2009, and the slowest year in more than a decade, not counting the recession year.  Further cooling is expected throughout 2014, but should help to balance the market.

Interest rates have dropped by 10 basis points or more, and could continue downward, but the long-term forecast is for the Bank of Canada to begin raising its main policy rate in the second quarter of 2015.

Alberta experienced a record-breaking 2013 with sales activity and benchmark prices for single-family homes especially in Calgary and the surrounding communities. Toronto rounded out the year with a 14% increase in sales and a 9% increase in prices for the month of December over 2012.  Finally, for the sixth consecutive year, Vancouver has ranked among the top three least affordable markets. At a median home price of $670,300, 10.3 times the gross annual median household income, Vancouver is second behind Hong Kong who’s median home price rose to 14.9 times income.

More highlights from January’s headlines:

OVERALL

  • Royal LePage: housing survey shows average price of a home in Canada increased between 1.2% and 3.8% in the fourth quarter of 2013. Standard two-storey home rose 3.6% year-over-year to $418,282, while detached bungalows went up 3.8% to $380,710. Price of a standard condominium rose 1.2% during the quarter to an average of $246,530. CEO Phil Soper says late 2013 saw the housing market transition to “buoyant sales volumes“ and above-average growth.
  • Building permits fell by a sharper-than-expected 6.7% in November, more than double the 3.0% pullback expected by analysts, while housing starts dropped to 189,672 units in December, shy of economists’ forecasts for 190,000.
  • Statistics Canada: Canada’s new housing price index did not change in November, after a 0.1% rise in October, with prices rising in eight metropolitan areas, unchanged in eight and declining in five.
  • Prices in Toronto-Oshawa region were up 0.1% on the month and a tame 1.4% on the year. Vancouver fell 0.2% on the month and 1.3% on the year. Calgary was up 0.4% since October.
  • Starts for all of 2013 slowed to 188,200 units, down sharply from 215,000 in 2012 and the lowest full-year tally since 2009, according to Robert Kavcic, senior economist at BMO Capital Markets.  “In fact, outside of that recession year, it was the slowest year for starts in more than a decade. We expect further cooling to about 180,000 units this year, which would reflect balanced overall building activity,” Kavcic said
  • Residential construction intentions sank by 7.6% with both single- and multi-family dwellings declining, while the nonresidential sector dropped by 5.2% as institutional and industrial building plans decreased. Commercial building intentions, however, were once again robust, with the value of permits hitting a record level over the past 12 months, according to Kavcic.
  • Stephen Poloz, central bank chief: The Bank of Canada should keep its key interest rate on hold until economic data persuades it otherwise. “For us, minimizing the risks of making a big mistake here is what we’re trying to do, and that tells us that we should be holding rates where they are until the data flow changes our mind.”
  • The CBC cited Poloz as saying he was not worried by international calls for rate hikes and that his decisions would be based on Canadian economic factors. In November, he disagreed with the OECD’s assessment that rate hikes could start in 2014.
  • Poloz: there would be upward pressure on rates this year, but he referred specifically to long-term market rates, not the rate set by the central bank, as the U.S. and global economies strengthen and stimulus is curbed. Adjusting the central bank’s target for the overnight rate, on the other hand, is a tool that is available “but we have to consider in the broader context what impact would it have,” he said. He suggested higher rates would have a negative impact on highly indebted Canadian consumers.
  • Canadian Real Estate Association: prices across the country rose 10.4% in December from a year ago to an average of $389,119. Once you hack out Toronto and Vancouver, the increase drops to 4.6%.
  • “For the year as a whole, existing home sales rose 0.8%, a pace that is neither too hot, nor too cold but largely in line with our view of a soft landing in the Canadian housing market,” said Diana Petramala, an economist with the Toronto-Dominion Bank.
  • Royal Bank lowered rates 10 basis points on two-, three- and five-year fixed rate terms. “Rates were lowered to match competitor pricing. Competitors have been pricing at lower rates for several weeks, and this rate change now puts us in line,” said a spokesperson.
  • Canada’s economy, once the envy of developed countries following the global recession, is struggling to gain momentum as households deal with record debts. Low interest rates pushed the nation’s ratio of debt to disposable income to a record 163.7% in the third quarter, according to Statistics Canada, surpassing levels in the U.S. “We’ve learned around the world that when you make the consumer indebted like that, their ability to withstand shocks is dramatically less,” Toronto-Dominion Bank Chief Executive Officer Ed Clark said. “So the economy as a whole is more accident prone, more fragile. Over time, the consumer becomes more fragile and the Canadian economy becomes less competitive,” he said. “That’s worth worrying about.”

PREDICTIONS

  • Royal LePage: prices are expected to maintain a “healthy momentum“ this year and rise a projected 3.7% over 2013. “We predict continued upward pressure on home prices as we move towards the all-important spring market.“ Phil Soper,Royal LePage CEO says. “We expect no landing, no slowdown, and no correction in the near-term. Conditions are ripe for as strong a market as we saw in the post-recessionary rebound of the last decade.”
  •  “The decline (in building permits) is in line with our expectation that residential construction will soften in the coming year in the face of affordability challenges to a pace more in line with underlying demographics,” CIBC World Markets economist Peter Buchanan said.
  • With prices stabilizing, economists expect new construction to cool further in 2014.
  • Finance Minister Jim Flaherty told CTV television: there would be some pressure to tighten (rates) because of the U.S. Federal Reserve scaling back its bond-purchasing program.
  • Falling bonds yields could push mortgage rates lower in coming weeks as banks compete in the spring housing market, traditionally the strongest real estate period of the year.
  • Analysts in a Reuters poll have forecast the Bank of Canada will begin raising its main policy rate in the second quarter of 2015.
  • Things aren’t holding up quite so well on the new home housing front, however, Canadian housing starts, which started to cool in the latter part of 2013, are expected to continue their decline into 2014 as affordability, and a significant decline in condo construction, continues to impact sales.
  • One ReMax realtor, with a respectable record of calling the ups and downs of Toronto’s condo market, in particular, blogged this week that he’s heard from so many buyers fed up waiting for prices to drop, he expects to see 95,000 sales transactions this year across the GTA.
  • Royal LePage: the “moderate” price growth that defined the Vancouver market in 2013 is likely to continue through 2014 with prices project to rise 4.4 per.
  • Bryan Yu, an economist for Central 1 Credit Union: “You’re not going to see the volatility we saw last year (in Vancouver), though there will be a slight drop off in momentum into the first quarter (of 2014).” Central 1’s forecast is for Metro Vancouver’s property sales to increase by six per cent in 2014, mortgage rates to increase but remain relatively low and employment growth to continue in pace with a stronger economy that will be influenced by improving conditions in the United States. For 2014, Central 1 Credit Union’s forecast is for prices to edge up about 1.5 per cent.
  • Shifts in 2014 (Vancouver) real estate prices will also be influenced by the types of properties people are buying, with lower-priced townhouses and condominiums expected to make up a bigger share of the market, according to Lance Jakubec, a senior market analyst for Canada Mortgage and Housing Corp. While Jakubec does not make forecasts for individual communities within the region, he added that it will be interesting to watch how markets along the Evergreen Line rapid transit corridor perform over 2014.
  • “It’s very reasonable for prices to ease or even fall,” said Benjamin Tal, deputy chief economist with CIBC World Markets, who rules out doomsday scenarios that would see prices drop 25%.
  • Toronto-Dominion Bank issued a note January 14, 2014 with a continued call for a soft landing in the housing market.
  • Urbanation: The GTA new condo market is expected to see a slow, steady rebound in sales through 2014 anticipating 15,500 sales in 2014.  They also expect more deals from developers keen to clear the record backlog of 19,004 unsold units that remained as of the end of 2013.
  • Brace for much lower gains — or even price slumps — in many of Canada’s major cities by the end of 2014, says Marc Pinsonneault, senior economist with the National Bank of Canada. The notable exceptions will be Calgary, which is expected to lead the country in 2014 with price gains averaging some 3.5 per cent, followed by Edmonton at 3.1 per cent, Toronto at 3 per cent and Vancouver at 2.5 per cent, year over year, says Pinsonneault.
  • Richard Cho, senior market analyst in Calgary for Canada Mortgage and Housing Corp., said sales in 2014 are expected to post another increase.
  • Fitch’s Global Housing and Mortgage Outlook, mortgage volumes in this country “may fall slightly” as government efforts to tighten mortgage rules since the financial crisis exert downward pressure on demand. One reason Fitch believes Canada is not facing a rough road in 2014 is because it expects unemployment to remain stable at around 7% and the limited use of risky mortgage products, curtailed in this country unlike the U.S. and other jurisdictions by strong government regulation.

VANCOUVER

  • Vancouver Real Estate Board:  sales of detached, attached and apartment properties in 2013 reached 28,524, up 14%from 25,032 sales in 2012. The total for 2013 was the third lowest for the region in the last 10 years.
  • Vancouver has the second least affordable housing market, according to a recent study that took median home prices in nine wealthy nations and divided them by gross annual median household income. The only city that ranked higher in the Demographia International Housing Affordability survey was Hong Kong. Homes in Vancouver, at a median price of $670,300, cost 10.3 times income. It was the sixth straight year the city ranked among the top three least affordable markets according to the study, which fingered land use regulations as partly to blame for a shortage of affordable housing.
  • Vancouver, the priciest market in the country, saw an increase of 36% in sales in 2013 from 2012 in homes selling for $2-million and up.

TORONTO

  • Toronto Real Estate Board: December home sales in Toronto were up almost 14% and prices were up nearly 9% compared with a year earlier.
  • Multiple listings service totaled 4,078 for the month, up from 3,582 in December 2012. Sales for all of 2013 totalled 87,111, up about 2% compared with 85,496 in 2012.
  • The average price for a home sold in December was $520,398, up 8.9% compared with $477,756 in December 2012.
  • New listings for the Toronto market in December were down by almost 4% over the same period.
  • Royal LePage: prices should climb a further 3.9 per cent in 2014 over average gains of 5.1 per cent in 2013 — as a shortage of lowrise homes in the 416 region continues to drive up average sale prices.
  • Resale condo transactions, especially in the more affordable 905 regions, saw the biggest increase of any sector of the housing market: Sales were up 27.8 per cent in December year over year — 46.1 per cent in the 905 regions (accounting for just 374 transactions) and 20.7 per cent in the 416 region.
  • The biggest price gains were in the City of Toronto, where sale prices were up about 7.6 per cent to $367,376, according to TREB’s figures
  • A shortage of listings has plagued the GTA market for more than three years now as baby boomers stay put and homeowners opt to renovate their homes rather than pay hefty real estate fees and land transfer taxes for properties that, in many cases, end up in bidding wars that have further pushed prices into the stratosphere.
  • Urbanation: prices for sold units grew by 1.3% on an annualized basis in the fourth quarter to an average of $543 per square foot, which is the slowest pace of growth since 2005.  Urbanation said sales totalled 4,299 in the fourth quarter, up 12% from a year ago and the best quarterly result since the fourth quarter of 2012. But it was not enough to stop a 22% slide for 2103 when compared to 2012.
  • Resale condominium apartment sales reached 15,698 units in 2013, up 2.7% from 2012. Condo resale prices jumped 2% in 2013 reaching $418 per square foot.
  • Rents continue to grow and were up 4.2% in 2013
  • The sale of both new homes and new condos hit their second-lowest levels in a decade in 2013. 30,054 new units — 12,256 of them lowrise homes, and 17,798 of them highrise condos — went up for sale across the GTA last year, 22 per cent less than in 2012 and close to the record low recorded in 2009 as the industry held its breath in the wake of the Great Recession.
  • In Toronto, where a luxury home is said to start at $1.5-million, sales were up 18% in 2013 over 2012. The most expensive home sold in the city last year went for $13.4-million for 21,000 square feet in the city’s prestigious Bridle Path area.

CALGARY

  • CMHC reported that total housing starts in the Calgary region closed 2013 slightly down from a year ago despite an increase in the single-detached sector. Total starts for the Calgary CMA were 12,584 last year, down from 12,841 in 2012. But the federal agency said the single-detached market saw starts rise to 6,402 from 5,961 the year before. In the multi-family sector, starts dropped from 6,880 in 2012 to 6,182 in 2013.
  • Statistics Canada: total building permits in Alberta of $1.5 billion were up 3.3 per cent from last year but down 2.8 per cent from the previous month. Residential permits of $875.5 million rose by 18.4 per cent on an annual basis but dropped by 8.7 per cent from October. Non-residential permits of $590.3 million were down 13.1 per cent year-over-year but up 7.5 per cent month-over-month.
  • Cochrane and Okotoks both experienced record years in 2013 for MLS residential sales activity
  • CREB: total sales in communities surrounding Calgary rose to 4,440 units in 2013, a hike of nearly 12 per cent. In the city, MLS sales rose by nearly 11 per cent to 23,489 transactions.
  • “Lifestyle preferences play a role in demand,” said Ann-Marie Lurie, CREB’s chief economist, in a statement. “Single-family homes in surrounding communities tend to provide newer and larger homes at a lower cost than in Calgary.”
  • CREB: 554 homes were sold in Cochrane in 2013, a nine per cent increase over 2012. Prices rose six per cent from 2012 with an average annual single-family benchmark price of $403,183.
  • CREB: Okotoks had 699 sales, up 19 per cent from 2012. Single-family benchmark prices in Okotoks rose 4.8 per cent to $385,308.
  • CREB: Sales in Airdrie rose by 15 per cent to 1,321 units. The single-family benchmark price averaged $357,583, which was a seven per cent increase.
  • CREB: The single-family benchmark price in Calgary in December was $472,200, up 8.60 per cent from a year ago.
  • “There’s huge demand for single-family houses in Calgary proper, and that’s meant price increases. All those young people who are moving to Calgary might be getting priced out of the market a bit, so they’re increasingly looking for condos and duplexes, but also more affordable single-family homes in these other communities.” Scott Bollinger, broker with the ComFree Commonsense Network said “Improving transportation accessibility is also a key factor. As the Ring Road actually becomes a true circle, it’s connecting Cochrane and Chestermere and Airdrie and Okotoks to Calgary like never before, and it’s allowing people who choose these communities to access work and play in the city without sacrificing their lives to the road.”
  • Calgary Real Estate Board: A slowdown in net migration this year should help ease some of the housing demand pressure in the city but overall MLS sales are forecast to rise by 3.6 per cent with prices going up by 4.28 per cent.
  • Sales of upper end homes, a luxury home starts at $1-million in Calgary, climbed 34% in 2013 from 2012. Edmonton is a little less pricey for a luxury home with the starting price $750,000 but sales jumped 32% over the same period.

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