Home buyers extended a trend of increasing sales into its fourth consecutive month, according to the Canadian Real Estate Association as mortgage rates also crept up last month.

However, economists suggested Monday the higher rates could help cool the market through the second half of the year.

“Interestingly, the recent move up in five-year fixed rates might have actually stoked sales activity in June, with buyers making their move before their lower rate contracts expired,” said Robert Kavcic, a senior economist at the Bank of Montreal.

“If so, that could set the stage for another cooling off period this summer.”

CREA reported home sales through its Multiple Listings Service were down 0.6 per cent from June 2012, but up 3.3 per cent from May.

Canada’s big banks have been raising rates for fixed mortgages in recent weeks as rates in the bond market have also climbed.

TD Bank economist Diana Petramala said she expects sales to slow down during the summer and fall, but noted they should remain at healthy levels.

“Conditions for housing demand are actually still quite good in most major markets, including good employment markets and decent affordability, with the exception of maybe Toronto and Vancouver,” Petramala said.

“Demographics are still quite supportive of sales roughly around the level that they currently are. So more of a stabilization going forward.”

Despite the drop in sales from June 2012, the national average sale price last month was up 4.8 per cent from a year ago, rising to $386,585.

CREA’s house price index, which adjusts for the difference in different property categories, was up 0.12 per cent from May and up 2.27 from a year ago.

The association said home sales improved in two-thirds of the markets it tracks compared with May with the biggest gains in Victoria, Vancouver, the Fraser Valley, Edmonton, Saskatoon, Winnipeg and Montreal.

When compared with a year ago, Toronto and Montreal were lower, while Vancouver, Calgary, and Edmonton were up compared with last June.

The number of newly-listed homes was down 0.5 per cent on a month-over-month basis in June.

Economists have suggested changes to rules for mortgage lenders and borrowers announced about a year ago have been a major factor behind a slowdown in Canadian residential real estate sales starting last August and continuing into early 2013.

CREA president Laura Leyser said “Whether those sale gains reflect temporary factors or a fundamental improvement after a slow start to the year really depends on where you are.”

The association said some 240,068 homes have sold in Canada through its MLS system so far this year, down 6.9 per cent from the first half of 2012.

Source: Alexandra Posadzki, Canadian Press

The Canadian Real Estate Association says home sales in June were down from a year ago but up from the previous month.

The association says sales last month were down 0.6% from a year ago, but up 3.3% when compared with May.

Looking at the city-by-city picture, when compared with a year ago, home sales in Toronto and Montreal were lower, while Vancouver, Calgary, and Edmonton were up compared with last June.

Despite the overall drop in sales from June 2012, the national average sale price last month was up 4.8% from a year ago.

The number of newly listed homes were down 0.5% on a month-over-month basis in June.

The association says some 240,068 homes have sold in Canada through its MLS system so far this year, down 6.9% from the first half of 2012.

Source: Canadian Press

Across Vancouver, mixed-use development – especially ones with specialty food markets or full-service grocery stores on the ground level – are popping up like mushrooms after a spring rain.

Condo purchasers want a new kind of lifestyle – one of convenience. As living space shifts downtown, municipalities are shedding old zoning models in which homes were placed in one spot, retail in another, industry in yet another, and everyone drove from one to the other. In Toronto, the movement is ramping up. In Vancouver, where space is at a premium, it’s rampant.

Yaletown was a decaying industrial area before Vancouver designated it as a mixed-use residential-commercial hub and made it a priority for redevelopment in the late 1990s. First, a highrise condo went up, then Choices Markets Ltd. won the lease to provide groceries in a structure adjacent to the residential building.

“The original developer approached us for tenancy as both a means of providing service to the neighbourhood and adding a selling feature for their condo development,” says Tyler Romano, director of marketing for Choices, a retailer known for natural and organic foods.

The developer approached national chains, but at the time they did not have a format for a grocery store with a smaller footprint. Choices won them over with plans to stock the shelves in only 11,500 square feet, a 10th of the size of a suburban big-box grocery store.

Over the past 13 years, as at least 15 condo towers were added, the area has morphed into a vibrant, upscale oasis, “a perfect fit for our brand of socially conscious, community-minded green retailing,” Mr. Romano says. “This works perfectly for the car-less urban dweller who adheres to the two-bags, six-blocks shopping pattern.”

The grocer has adapted its offerings for the clientele – many of them younger single people and busy professionals who want to pick up dinner right where they live – with grab-and-go items from the salad bar and deli making up a high proportion of sales.

“It’s unbelievably convenient when it’s nine o’clock at night and all you have to do is go straight down the stairs and walk into a store and grab products,” Mr. Romano adds.

In Toronto, grocery was always part of the plan of the massive Concord CityPlace development which, when complete, will be home to 20,000 people. Tucked in a downtown corner off Spadina Avenue, a vibrant 20,000-square-foot Sobeys grocery store offers benches outside for patrons to take the sun, with a flower shop up front.

“It’s quite quickly becoming the heart and soul of CityPlace,” says Gabriel Leung, director of development for Concord Adex. “Financially, if we could have landed a retailer sooner, we could have leveraged on that and included it in our marketing materials. People always appreciate these kind of things in an urban centre.”

Concord Park Place, the developer’s second Toronto highrise neighbourhood at Sheppard and Leslie streets in Toronto’s North York area that will boast 10,000 units when complete in 2018, does not yet have a grocer. “We’ve been talking to a few other mainstream operators,” Mr. Leung says, adding that it takes a long time to negotiate with national chains.

Originally, though, the grocery store was not part of the plan. Home Depot Inc., which had wanted to get closer to the downtown condo market, had signed a lease agreement with developer RioCan Real Estate Investment Trust, but when the economy in the United States sharply contracted in 2008, the hardware giant was forced to lay off employees and close stores. It broke its lease with RioCan. Almost immediately grocery stores lined up to fill the vacancy.

David Speigel, vice-president of operations at Tribute Communities, which partnered with RioCan to work on the residential portion of the project, recalls welcoming the switch to a grocery store. Tribute wasn’t keen to have residents live on top of a hardware store.

Mr. Speigel thinks residential can co-exist right next to retail – although mixed-use planning is more complex and there are few developers with the expertise to construct both. “It becomes very complicated because you have floors that are servicing both retail and residential.”

A small development, epecially, makes more sense financially when combined with retail stores beneath, Mr. Speigel said. “It’s less important when you have a 40-storey building; the retail at the bottom of it becomes less significant.”

He maintains downtown condo buyers are happy to live above the grocery store. He even knows of one, happy to wander down to the store to grab his dinner in his “boxers and flip flops” on a cold winter day.

Source: Beverley Smith, The Globe and Mail

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

Toronto’s condo market is taking it on the chin, though that compares to a strong 2011.

Condominium sales in Canada’s biggest city plunged 30 per cent in the third quarter from the second, leading developers to delay launching projects, Urbanation Inc. said today.

Sales of new condos fell to 3,317 in the latest quarter, the research firm said. In the first nine months of the year, sales slipped to 14,156, and are on track to close out the year with a 35-per-cent decline from last year’s record level of 28,190.

“With slowing sales and a record level of unsold inventory in the market in the second quarter, condominium developers reacted quickly by delaying their project launches, especially in the ‘416’ area,” said executive vice-president Ben Myers, referring to one of the area codes used in the Toronto area, the other being further from the city core.

“Just five projects launched in Toronto in Q3-2012, as developers choose to review their pricing assumptions and unit mix.”

Resales also sank in the third quarter, by 32 per cent to 3,413 from 5,050 in the second quarter.

“The change in the mortgage insurance rules may have forced many buyers to settle for smaller units then they had previously desired,” Mr. Myers said, referring to the latest round of restrictions from Finance Minister Jim Flaherty that took effect in July.

“The number of resale transactions for units priced over $400,000 fell 40 per cent compared to last quarter, while there was a 38-per-cent quarterly drop in units traded over 1,000 square feet.”

Slowing sales in the city, where observers, including the finance minister, feared a condo bubble, are taking their toll on projects.

“The number of unit completions in 2012 are well below our forecasts, as construction delays have pushed back occupancy on a number of projects,” said Mr. Myers.

“The average project that completed construction in 2012 took 3.85 years from sales launch to occupancy. Compare that to 2003, when they average took just 2.68 years for a similarly sized project (205 units vs. 197 units).”

Unsold inventory in the city had reached a record 18,123 in the second quarter, but that has since slipped to 17,182.

And, noted Urbanation, starts have eclipsed completions for the eighth quarter in row, leaving a record 207 projects, with more than 56,300 units, under construction.

“The 28,000-plus completions next year could add as many as 14,000 new condominium rental units to the Toronto [census metropolitan area] via private landlords, which would represent a whopping 25-per-cent increase in condominium rentals in the metropolitan area,” it added.

Source: Michael Babad, Globe and Mail

Homeowners in the Greater Toronto Area, Calgary and Vancouver are outpacing the national average when it comes to their intentions of buying a property within five years, according to the first BMO Housing Confidence Report released Tuesday.

Intentions to buy in the Greater Toronto Area (57 per cent), Calgary (62 per cent) and Vancouver (53 per cent) were above the national average (46 per cent).

Also, homeowners in Canada expect prices to rise by 2.0 per cent over the next year while those in Calgary expect an increase of 2.4 per cent.

“The fact that 46 per cent of Canadian homeowners intend to buy a property in the next five years implies that Canadians are feeling confident in the current real estate market environment,” said Martin Nel, vice-president of lending and investments with BMO Bank of Montreal. “However, that certainty is tempered, given the adverse effect moderate increases in home prices and mortgage costs would have on the average homeowner.”

“Rising debt and elevated house prices have increased the vulnerability of a meaningful number of households, and their financial situation will worsen if interest rates increase even moderately,” added Sal Guatieri, senior economist with BMO Capital Markets. “With rates likely to remain low for some time, the recent tightening in mortgage rules will help to cool credit growth and the housing market.”

The BMO report also revealed: 18 per cent plan to downsize to a smaller home and the same percentage intends to up-size to a larger home; 10 per cent plan to sell their home and move in to a rental property, retirement community, or move in with family in the same time period; 21 per cent plan to purchase an additional property for income, investment, or recreation; 57 per cent are familiar with the new mortgage regulations introduced earlier in 2012; 22 per cent say they are less likely to buy a new home in the next five years because of the changes; and 29 per cent planning to buy in the next five years say that they are likely to spend less on a new home as a result of the new rules.

Nationally, intentions to buy drop significantly from 46 per cent to 36 per cent in the event of a five per cent increase in home prices. In Alberta, a five per cent increase would change intent to buy by only one per cent; however, a 10 per cent increase would lower intent by nine per cent, moving from 51 per cent to 42 per cent.

Source: Mario Toneguzzi, Calgary Herald

Canada’s housing market appears to be cooling across the board in the face of tighter mortgage rules that affect many first-time buyers of modest means, a new analysis from the Conference Board shows.

The think-tank’s snapshot of resales for August shows a widespread decline in sales of existing homes, with 21 of 28 metropolitan markets registering a drop from July, and 16 of the markets showing a falloff of five per cent or more.

As well, listings fell in 17 of the 28 markets, an indication that owners were reluctant to place their homes for sale due to soft conditions.

Senior economist Robin Wiebe of the Conference Board said there was evidence of cooling in some markets — particularly Vancouver and Victoria — before the new rules went into effect July 9. But the new data shows the slowdown has spread to most markets and from coast to coast.

“When you see sales down in three-quarters of the market, that means it’s pretty widespread,” he said. “It’s knocked down previously high-flying markets like Regina and Saskatoon down a peg. Vancouver had been showing signs of cooling, now it’s spread out into the Fraser Valley.”

At the time Finance Minister Jim Flaherty announced a maximum amortization period for mortgages would be reduced to 25 years from 30 years, the government estimated it would increase monthly payments by $184 on a $350,000 mortgage.

It had been the fourth time Flaherty tightened mortgage requirements in four years, but the July measure was regarded as the one likely to be the most effective.

While sales and prices were only temporarily sidetracked by the previous announcements, only to recover a few months later, this might “be the one that broke the camel’s back,” said Wiebe.

Last week, the Canadian Real Estate Association reported that sales of existing homes fell 5.8% in August from July, and were down 8.9 per cent from August 2011.

Still, the latest data shows that while sales and listings are down, prices appear to be holding steady.

The report found prices fell in only nine of the 28 markets in August from the previous month. Compared to last August, prices were up in 25 markets.

Economists have generally been forecasting a correction of between 10 and 25% in prices over the next two or three years. Vancouver, which had for years been Canada’s hottest market, has seen a tumble of about 30 per cent in resale homes.

But Wiebe is not so sure the correction will be as severe as many predict, or that Vancouver’s market is as cold as the numbers suggest.

He notes that Vancouver’s average home prices are skewed by the number of high-end properties sold — many to investors from China. Both the meteoric rise and current decline are “overstated,” he said.

Homes in the Toronto area, Canada’s largest market, are also likely to retain their value, he said, because the economy in the city remains healthy and the greater metropolitan area continues to experience strong population growth.

Source: Julian Beltrame, Canadian Press

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

Toronto “is starting to stand out as the hottest real estate market right now,” following the release of December sales figures, BMO Nesbitt Burns economist Robert Kavcic says.

However, that may be somewhat of a booby prize, as the Canadian market, following a 13-year boom, is cooling overall – and Toronto is expected to follow suit, he added.

The Toronto Real Estate Board said Thursday that Greater Toronto real estate agents reported 4,718 sales in December, up 10.1 per cent from the same period in 2010. The average selling price was $451,436, up 4 per cent year over year.

That capped off the second-best year on record under the board’s current boundaries, dating to 1994. “Low borrowing costs kept buyers confident in their ability to comfortably cover their mortgage payments along with other major housing costs,” board president Richard Silver said in a release. The board said buyers were held back by a shortage of listings, while tight market conditions kept upward pressure on selling prices.

It’s a different story for Vancouver’s real estate market, where the number of residential sales in December tumbled by 12.7 per cent over the same period a year earlier, according to figures released this week by the Real Estate Board of Greater Vancouver. Sales for 2011 were 5.9 per cent above 2010 levels but 9.2 per cent below 2009. The overall residential benchmark price, as measured by the MLSLink Housing Price Index, has also dropped by 1.5 per cent since June.

Earlier this week, TD senior economist Jacques Marcil predicted both B.C. and Ontario could face challenging housing markets over the next two years.

Mr. Kavcic said the ratio of sales to new listings in Toronto and throughout Ontario “is pretty much in line with historical norms,” but noted that the number of starts for new multiple-unit dwellings (largely condos) in Ontario over the past 12 months had outpaced single family homes by a factor of 1.5 to 1, up from a ratio of close to 1 to 1 over the past decade and “pretty well the largest discrepancy we’ve seen in a long time.”

As a result, “to the extent where there is downward pressure on prices, the condo market is more at risk” in Toronto, he said.

Merrill Lynch warned last month that housing prices could correct by as much as 10 per cent in the next two years in Canada because of weakness in the economy, expressing particular concern about Toronto’s condo market. The Bank of Canada also warned the Toronto market looks overbuilt and could see prices drop.

Source: Sean Silcoff, Globe and Mail