The rental market in Toronto condominiums is heating up, with increasing numbers of units being leased rather than sold and rents continuing to rise in the first quarter of 2013, an analysis by the market research company Urbanation suggests.

There were 31 per cent more condo units leased in the first quarter than a year ago, Urbanation found, and rents were up 4.4 per cent, a gentler jump from the 5.9 per cent increase that occurred between the first quarters of 2011 and 2012 but still a significant rise, said Pauline Lierman, Urbanation’s director of market research.

The average rent was $1,856, or $2.33 per square foot, in the first quarter compared to $2.11 in Q1 2011.

That jump in rent of more than 10 per cent in two years is mainly a product of demand, with the most desirable units in downtown locations close to transit lines and amenities, Lierman said.

“The vacancy rate is barely over one per cent for rental condominiums,” Lierman said. “The market has remained tight.”

Investors who have bought condos are choosing to rent them out instead of selling them, Urbanation’s senior vice-president, Shaun Hildebrand, said in a news release.

“For the first time in a while, rents are rising faster than prices,” he said.

Of the 773 new condominium units listed in Q1 2013, 13 per cent were rented out, versus four per cent of listed units in Q1 2012. Only two per cent of the new listed units were resold, down from 2.8 per cent last year.

“You’re seeing a higher trading factor rather than a resale factor,” Lierman said. “What you’re seeing is more [units] are going into the rental market. These people may be investors or people who bought and aren’t going to use their units and are not putting their units into the market.”

Much of the increase in rentals in Q1 2013 is owing to the fact that more than twice as many condominium projects were completed that quarter than in 2012: 4,859 new units were registered in Q1 2013 versus 2,127 in Q1 2012.

Many condo projects were started in the volatile period of 2008-2009 and experienced construction delays because of the recession and are only now making up the deficit, which is in part why the number of available new condo units was so much lower last year, Lierman said.

Lierman says that another factor driving more people to rent condo units instead of buying them is the further tightening of mortgage rules last year, which shortened the maximum amortization period for government-backed insured mortgages and reduced the maximum size of home equity loans.

“The changes have definitely seen first-time buyers put off; they’re renting,” she said. “It’s hard to quantify, but you can definitely see the resale market has slowed down throughout the latter half of the year. Even the new sale market slowed down. We were ahead of the year before during the first half of 2012 and then everything eased off. Prices have flattened out.”

Source: CBC News

Canada’s hot housing market showed signs of cooling on Thursday as July housing starts slowed more sharply than expected, but housing prices were still climbing in June and analysts said a real slowdown may not come until late in 2012.

Ground breaking on new homes fell to a seasonally adjusted annual rate of 208,500 units in July, according to the Canadian Mortgage and Housing Corp, a sharp slowdown from the 222,100 units in June and below the forecasts of analysts in a Reuters poll, who had expected 213,300 starts.

It was the first time in seven months that the rate of starts fell below the six-month trend, and a government decision to tighten mortgage lending from July was expected to contribute to further slowing as 2012 draws to a close.

“We do expect that the impact of tighter mortgage regulations announced in late June will slow housing demand, but the impact on the construction and starts data is unlikely to show up until later in the year,” David Tulk, chief Canada macro strategist for TD Securities, said in a research note.

This week, Scotiabank forecast that home prices in Canada will fall 10% over the next two to three years. But other economists have predicted as much as a 25% correction.

The hot market has sparked fears of a bubble, particularly in Toronto, Canada’s largest city, and in Vancouver, as low interest rates fueled condominium building and double-digit annual price increases for existing homes.

The bulk of the pullback in July housing starts came in the multiple unit segment, where starts in the volatile condo market in British Columbia braked. That was in line with earlier data that has shown cooling in the Vancouver real estate market.

Multiple unit starts dropped 7.6% to 123,000 annualized units, the lowest level since February. Single unit starts fell 4.0% to 64,000 annualized units.

The slowdown in July pushed starts below the average for the second quarter and suggested the housing sector may not drive Canadian gross domestic product growth for much longer.

Mindful of the U.S. housing boom that was left unchecked until it burst, the Canadian government in July tightened conditions for homebuyers and mortgage lenders in a bid to deflate a possible bubble before it pops. The changes took effect in July.

This week Bank of Canada Mark Carney also stressed that despite global economic turmoil, interest rate hikes were still on the table in Canada.

Other data showed that prices of new homes in Canada rose by 0.2% in June, the 15th consecutive month-on-month increase, and continued strength in large cities such as Toronto and Calgary, Statistics Canada data showed.

The advance matched market expectations and follows the 0.3% month-on-month-gain in May.

Prices in Toronto, which accounts for 26.6% of the entire market, rose 0.3% in June, while prices in Calgary, where the booming energy industry has fueled demand, were up by 0.5%. New housing prices rose in 13 metropolitan regions, were unchanged in six and fell in two. Prices in June 2012 increased by 2.3% from June 2011 compared to the 2.4% year-on-year advance recorded in May 2012.

Source: Andrea Hopkins, Reuters

If you thought Chinese investors were starting to lose interest in Canadian real estate, think again.

According to a new report, both Vancouver and Toronto are forecast to be this year’s most popular destinations for Chinese overseas property investment.

“Buying sentiment for overseas properties among Chinese mainland investors has been gaining strong momentum over the past few years,” said Derek Lai, director of international properties for Colliers International real estate services and the author of the report. “To date, about 20% to 40% of the foreign property investors in these destinations are from the Chinese mainland.”

The report goes on to cite Vancouver’s Chinese population – what it pegs as 30% of city residents – as one of the driving factors for that investment choice.

Mainland Chinese investors are also lured by the Lower Mainland’s educational opportunities and proximity to home, according to Colliers.

Still, Canada’s two largest cities are facing some competition for Chinese investment, with London and Singapore rounding out the top four real estate destinations.

In the UK, rising property values and a very limited supply have accelerated the push into London, with Chinese investors now buying as much as 20% of all new builds.

Singapore’s low mortgage rates of 1.2% to 2%, relatively high and stable rental yields of around 5% and a transparent transaction system are responsible for attracting its share of mainland Chinese interest, according to the Colliers report relying on both interviews and investment declaration states.

In Canada, Vancouver’s appeal helped to drive up price gains in large parts of the Lower Mainland last year, with domestic investors concerned another year of strong transaction growth could present a real challenge to their own acquisition plans if sellers continue to hold out for well-heeled foriegn buyers. Many have only begun to lower their asking prices to meet the current market realities; ie, more supply than demand.

That said, there has been some movement.

The dollar value B.C. properties sold in January dipped 7.6% to $2.1 billion, compared to the same month last year. The average MLS residential price was 3.8% lower at $527,219 compared to January 2011.

Source: Vernon Clement Jones, Canadian Real Estate Wealth

Condominiums have become a hot sector of the Canadian real estate market, particularly as an option for first-time home buyers spooked by high prices for single-family homes, says a report released Monday.

Real estate services firm RE/MAX says affordability, lifestyle, investment opportunities and urban renewal efforts are among the reasons condo sales have spiked over the last year in some Canadian markets.

“As one of few affordable housing options available to first-time buyers, the concept is poised for dramatic growth in years to come,” Michael Polzler, executive vice-president for RE/MAX’s Ontario-Atlantic Canada operations, said in a statement.

RE/MAX said condo sales in the Greater Toronto Area are up 10.4 per cent, year-to-date, as of September, and now represent one out of every three homes sold there. In Ottawa, condo sales are up 11.9 per cent.

“The lifestyle has also gained a foothold with younger, hipper audiences as the definition of home ownership evolves with the changing demographic,” Polzler added. “Dreams of the small home with a white picket fence are being replaced by the funky loft apartment in proximity to shops, restaurants and entertainment.”

Price comparisons provided by RE/MAX for Ottawa showed the average price for condominiums had risen 12.9 per cent to $252,641 over the last year, but was still more than $100,000 cheaper than the average price of $366,587 for a single-family home.

While the RE/MAX report focused specifically on Ontario and Eastern Canada, Gregory Klump, chief economist for the Canadian Real Estate Association, said condo sales are becoming a bigger share of more expensive housing markets across the country, such as the Toronto and Vancouver real estate markets.

“(Condos) have been accounting for a greater percentage over time of all sales activity,” Klump said. “Condo units are an affordable alternative to single-detached home ownership.”

The RE/MAX report said other factors driving the condo market include urban redevelopment that favours intensification over urban sprawl, empty-nesters seeking low-maintenance retirement properties and investors hoping to sell when prices appreciate, the report said.

RE/MAX said the “vast majority” of newly built condominiums in Toronto are purchased by long-term investors from Asia and the Middle East, who will often rent them out until they find their desired sales price.

Read more: http://www.canada.com/business/Condominium+market+Canada+heating/3757559/story.html#ixzz16GysmzBG

Written by: Derek Abma, The Vancouver Sun (c)