Toronto Condo and Real Estate Blog

Despite turmoil in the U.S. market, real estate group predicts jump in sales of existing homes

By Roma Luciw - Globe and Mail

Seemingly insatiable demand among Canadian home buyers has led an industry group to raise its 2007 sales target, even as the subprime mortgage crisis and real estate woes ripple through the U.S. economy.

Sales of existing homes are expected to surge to a record 523,100 units this year, an 8.1% jump from last year, the Canadian Real Estate Association said in a new residential forecast. That is up from a previous target of 500,995 units and 3.6% growth.

In its original forecast, issued in February, the Canadian Real Estate Association had predicted sales would ease 1.6% from 2006, pressured by higher prices and rising mortgage costs. It revised that outlook in May, calling for higher sales.

Now, phenomenally strong second-quarter sales have prompted an even more bullish outlook for the remainder of the year. “We had anticipated that the real estate market would cool in the second quarter, but instead of cooling, it went further to a boil,” said Gregory Klump, chief economist with the Ottawa-based group.

A vastly different picture is unfolding in the United States, where the collapse of the subprime mortgage market has exacerbated an already severe downturn in the real estate market, leading to widespread fears about the overall health of the U.S. economy and triggering a global credit crunch that has rattled financial markets.

Douglas Porter, deputy chief economist at BMO Nesbitt Burns Inc., said the fundamentals of Canada’s real estate market are healthier than south of the border, because mortgages rates here have not shifted upward as dramatically.

There is also still considerable pent-up demand for housing in Canada - built during the downturn in the 1990s - that has not been satisfied, he added.

Mr. Porter said any impact the U.S. crisis may have on Canada will likely be modest. “We could get a headline chill in consumer confidence, whether through the turmoil in financial markets or the fact that people are reading on a daily basis about [it].”

The interest rate and employment situations in Canada are both still favourable to housing, Mr. Porter said. “The U.S. conditions might keep the Bank of Canada from raising rates, which would ironically keep the real estate market going longer and stronger than it otherwise would have.”

Although 2007 sales are proving brisker than expected, the Canadian Real Estate Association still expects Canada’s real estate market will ease in 2008, dipping 2%, as rising house prices eat into affordability. CREA had previously called for sales activity to cool 2.8% in 2008.

According to the Canadian Real Estate Association forecast, 2007 sales will be strongest in Saskatchewan, surging 33.7% from last year, and weakest in British Columbia, rising 4.6%.

Resale housing prices are also expected to reach new highs this year and in 2008, although the pace of the price increases will ease next year.

The average national price is seen rising 10.4% to $305,900 this year, and another 5.5% to $322,700 in 2008.

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By Kathryn Young - CanWest News Service

The Canada Green Building Council will introduce a rigorous new green home certification program a year ahead of schedule by piggybacking on a U.S. pilot project instead of conducting one of its own.

Some Canadian homebuilders were so eager for the LEED (Leadership in Energy and Environmental Design) for Homes program that they joined the American pilot project, said Derek Satnik, chair of the council sub-committee dealing with the issue.

“The biggest concern we have is that there is so much interest that if we don’t move quickly, we’ll fall behind the industry,” said Satnik, managing partner of Mindscape Innovations, a consulting firm for energy efficient buildings. “The demand is already there.”

Developed in the U.S., the LEED program has come to Canada in stages, with commercial, institutional, industrial and multi-unit residential certification now in place. With increasing concern over environmental issues, there’s been growing demand for the individual homes component, which has been tested in the U.S. for two years and is due to be formally launched in November, said council vice-chair Andrew Pride, also vice-president of energy management for Minto Homes.

“We’re going to take the U.S. program and make it Canadian,” he said.

The U.S. expected 50 builders and 300 homes to be certified under the pilot project, but ended up with about 400 builders and 6,000 homes, Pride said.

“Rather than trying to market LEED for Homes and create demand for it, they’ve been trying to manage the demand and grow fast enough to meet it,” Satnik said. “There’s been no lack of interest. We’re already seeing the same in Canada.”

LEED buildings go beyond energy efficiency to award points for water management, construction waste management, enviro-friendly materials, indoor air quality and sustainable building sites. There are four levels of certification - certified, silver, gold and platinum.

The first Canadian LEED single-family home, built by Reid’s Heritage Homes in Guelph, Ont., received platinum certification this summer through the U.S. pilot project. It registered 91.5 on the zero-to-100 energy efficiency scale. (By comparison, a net-zero-energy home would score 100, R-2000 homes must score at least 80 and the prime minister’s official residence at 24 Sussex Drive scored 28.)

“We’re seriously looking at, within a year, developing a process where we can actually do LEED certification on every single detached home,” said Andrew Oding, Reid’s manager of product development. “It will be feasible. It’s not pie in the sky.”

LEED for Homes appeals to retired engineer Peter Nelson, who is planning an affordable net-zero-energy home near Perth, Ont. with solar thermal panels for hot water, photovoltaic panels for electricity generation, geothermal heat, insulated-concrete form foundation and walls, rainwater collection, and native plants in the landscaping. He’s studied the American LEED requirements and believes they’re doable, although he’ll wait to see how expensive certification is before going that route.

“I certainly want the house to have some certifiable measurement, so anyone who wants to buy it in the future sees what they’re getting,” Nelson said. “Every house should be built this way and will need to be in the not-too-distant future. And what the heck - it’s a challenge.”

Last week, the council invited Canadian homebuilders registered with the American pilot project to use their experience to help write the Canadian standards for LEED for Homes, expected to be formally launched here next June, said Pride.

Monarch Corp. is researching a possible LEED for Homes project, said Kevin O’Shea, Monarch’s low-rise purchasing manager. And Ottawa’s Dharma Developments has just registered with the U.S. pilot project for a 36-unit, low-rise condominium, said Dharma president Akash Sinha, who will look into helping write Canadian standards that take our colder climate into account.

Sinha’s project should include greywater re-use (from showers, dishwashers, laundry, etc.), solar water heating, permeable surfaces for parking, native vegetation and heat-recovery ventilation in the infill project. The units will average 1,000 square feet each and cost $170,000 to $180,000.

“You can have green environmentally conscious buildings and still be affordable,” Sinha said. “That’s a major factor for us.”

The council also wants input from builders involved in other energy-efficiency programs such as Energy Star in Ontario and Saskatchewan, Built Green in Alberta and B.C., Novoclimat in Quebec, Yukon GreenHome, Power Smart in Manitoba and B.C., plus the national R-2000 program. The 12 builders now constructing net-zero-energy demonstration homes across Canada could also provide valuable information, said Pride.

“The whole idea of LEED is not to push away all the other rating systems, it’s really to gather them all together and say ‘Let’s put this under one hat’,” said Pride. Together they will determine what changes or additions are needed to make an Energy Star or Built Green home certifiable under LEED.

Built Green, which has certified about 4,800 homes in Alberta and B.C. since it began in Calgary in 2003, is on the committee to help develop the Canadian standards, said Built Green president David Bengert.

“We ultimately have the same goals,” he said. “We’re supportive of any program whose goal is to improve energy efficiency and environmental impact.”

Builders are attracted to LEED because it has integrity, is industry-driven rather than by government, and offers a lot of technical support, Oding said. After they’ve gone through the process once, builders find it’s not as daunting as they expected.

“It’s all about building a better house,” he said. “I think it’s going to be a success.”

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By David George-Cosh - The Globe and Mail

Toronto’s love affair with the condo shows no sign of abating, according to the latest market overview by a major condo-research firm.

In the second quarter, ending June 30, the Greater Toronto Area saw record levels in multiple sectors - new sales, resales, new project openings and new condo units, according to Urbanation, a Toronto-based research firm that has been measuring the condo market since 1981.

Over all, almost 7,000 new units were sold and more than 4,100 units were resold in the April-to-June period.

As well, more than 54,900 new units entered the market.

Jane Renwick, editor and executive president of Urbanation, attributes the booming market to the spate of new projects and the rapid growth in a variety of buyer groups.

“We’re really seeing a lot of those who have purchased a condo are now buying a second one [and]… the first influence of empty-nesters, who are now buying into the market and are planning to downsize in the next three or four years,” Ms. Renwick says.

The second quarter saw 36 project openings - more than four times the number in the first quarter, but Ms. Renwick noted that several projects opened later than expected.

Urbanation’s analysis suggests we are on track to break the Toronto condo-sales record of 16,224 units set in 2005, with Ms. Renwick forecasting a total of 17,000 new condo sales and 14,000 condo resales this year.

Ms. Renwick says the strong loonie, low unemployment and steady immigration rates have all contributed to the healthy Toronto condo market. “There’s a lot of positive economic indicators that point to a very stable economy and when you’re in a scenario like that, people are confident enough to buy real estate in Toronto.”

Given the strong economy, she doesn’t see an end to the Toronto condo boom any time soon.

“The sales cycle we’re on right now actually started around 1996, so it’s been an upward trend,” Ms. Renwick explains.

“At different times, it’s been more of a sharper incline and then flattened out, but at no time has pricing ever dropped… from year to year.”

However, Urbanation’s report also questions whether the Toronto condo market “can sustain this kind of volume, especially in an environment of aggressive price increases.” Ms. Renwick noted that, “Affordability - from both an investor and first-time buyer perspective - is also being tested as prices continue to rise.”

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