Toronto Condo and Real Estate Blog

The Canadian Press

Canada’s housing market bucked the gut-churning downward spiral south of the border, with new homes commanding higher prices and developers going ahead with building a surprising number of new homes, according to the latest figures released Monday.

The housing picture appeared to be far rosier in the early fall than most analysts had predicted, but economists warned that looks can be deceiving.

“While new home construction in Canada has been holding up quite well thus far, we expect starts to weaken considerably over the next year,” said Dina Cover, an economist with TD Financial Group.

“Already, we are seeing evidence that existing home prices are softening, particularly in Alberta and B.C.”

Canadian Mortgage and Housing Corp. reported housing starts nationally slipped 3.1% in October from a month earlier, but remained robust at 211,800 units on an adjusted annualized basis.

At the same time, new-house prices continued to climb, albeit at their slowest pace in about eight years, Statistics Canada reported.

New homes cost 2.1% more in September than they did a year earlier, but the increase was lower than the 2.3% rise recorded in August.

St. John’s and Regina saw the largest year-over-year gains at 22.7%.

On the other ends of the spectrum, new-home prices in Edmonton fell 5.8% in September compared with a year earlier, the city’s biggest yearly decline in more than 20 years.

Robert Kavcic, of BMO Capital Markets Economics, noted that single-unit starts fell in October to below the 70,000-level for the first time since 2000 — part of a five-year downward trend.

The decline of 14.5% over the past year is still nothing like the 40% meltdown seen in single-family starts in the United States.

However, Kavcic warned the solid overall housing-start numbers are a reflection of ongoing strength in multi-unit construction, a situation he said is unlikely to persist.

“Starts in this segment are up a solid 11.5% year over year so far in 2008, but could be at risk in the coming quarters as the credit crunch and economic headwinds take their toll,” Kavcic said in an analysis called “Strong Facade, Shaky Foundation.”

“Canadian residential construction activity has held steady since 2003 thanks to strong multiple-unit starts and strength in western Canada, two sources of support that are likely to wane in the coming quarters.”

Paul Ferley of RBC said new construction will slow substantially next year, falling to about 180,000 units in light of “a worsening in the financial market turmoil or from a knock-on effect of a more pronounced weakening in the U.S. economy.”

Nationally, actual starts were down about 1.6% so far this year compared to the first 10 months of 2007, CMHC reported.

Overall, prices gained 0.1% in September after staying unchanged in August, Statistics Canada said.

New home prices rose fastest in Atlantic Canada, led by a 22.7% surge in Newfoundland and Labrador, but the situation looked a lot different in the west.

Prices in Alberta fell 3.4% in September — the only province to see a year-over-year decline.

On a annual basis, new home prices were up 1.4% in Vancouver, 4.3% in Ottawa, 3.0% in Toronto and 4.8% in Montreal. Prices were off 1.2% in Calgary.

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Ottawa Business Journal

The Canadian real estate market will be shielded in 2009 by the more cautious behaviour exhibited by industry players compared to those in the market south of the border, with Vancouver ranked as the city to watch for real estate investment, according to a new PricewaterhouseCoopers and Urban Land Institute report.

The report said it’s currently a “moderately good time” to sell property, with western provinces boasting the strongest growth trends and lowest vacancies in North America.

“U.S. housing woes haven’t extended to Canada, where banks and regulators have managed the excessive mortgage lending practices of our neighbours to the south,” said PwC partner Frank Magliocco in a statement. “Property markets, including housing, track at or near equilibrium, with high occupancies and controlled development. We always get caught up in U.S. trends, but given our strong fundamentals they shouldn’t affect us to the same magnitude.”

The percentage of firms who responded to the survey who said they had good prospects for profitability remains high, with 35.8% saying they had “very good” prospects and 22.4% saying they had “excellent” opportunities for profitability. However, the report noted that those numbers are lower than last year, when 38.5% said they had “very good” prospects while 23.8% said opportunities were “excellent.”

Meanwhile, while credit tightness will likely mean it will cost more to get financing even in Canada, the report said capital has “remained disciplined” and should steady in 2009.

“In fact, Canada ranks third in the world – preceded by Asia Pacific and the Middle East – for a moderate to high increase in the availability of capital for real estate,” said Chris Potter, who is also a PwC partner.

The report said industrial real estate will be the strongest category next year, although all sectors will show strength, including housing. However, while the home sale market will hold steady, new housing development is expected to cool, the study noted.

Across Canada’s top real estate markets, Vancouver was named as the highest-rated city for 2009, with Calgary and Edmonton also receiving high ratings for “investment prospects, development and for-sale housing.” The report also named Ottawa as one of the markets with a fairly strong score.

Out east, however, the property markets appear to be weak, with the report warning investors to be cautious when looking into the Maritime markets, except if they are “knowledgeable about the specific centres in this area.”

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By Virginia Galt - Globe and Mail

The price of new homes in Canada increased by 2.1% in September on a year-over-year basis, a slower pace than the 2.3% advance in August but still slightly ahead of economists’ expectations.

On a monthly basis, new housing prices rose a bare 0.1% between August and September.

However, the bloom was off in the Edmonton and Calgary housing markets.

“Edmonton recorded a 12-month drop of 5.8%, which was the largest annual decline since July, 1985, while prices in Calgary declined 1.2%,” Statistics Canada reported Monday.

The Canadian real estate market will be shielded in 2009 by the more cautious behaviour exhibited by industry players compared to those in the market south of the border, with Vancouver ranked as the city to watch for real estate investment, according to a new PricewaterhouseCoopers and Urban Land Institute report.

The report said it’s currently a “moderately good time” to sell property, with western provinces boasting the strongest growth trends and lowest vacancies in North America.

“U.S. housing woes haven’t extended to Canada, where banks and regulators have managed the excessive mortgage lending practices of our neighbours to the south,” said PwC partner Frank Magliocco in a statement. “Property markets, including housing, track at or near equilibrium, with high occupancies and controlled development. We always get caught up in U.S. trends, but given our strong fundamentals they shouldn’t affect us to the same magnitude.”

The percentage of firms who responded to the survey who said they had good prospects for profitability remains high, with 35.8% saying they had “very good” prospects and 22.4% saying they had “excellent” opportunities for profitability. However, the report noted that those numbers are lower than last year, when 38.5% said they had “very good” prospects while 23.8% said opportunities were “excellent.”

Meanwhile, while credit tightness will likely mean it will cost more to get financing even in Canada, the report said capital has “remained disciplined” and should steady in 2009.

“In fact, Canada ranks third in the world for a moderate to high increase in the availability of capital for real estate,” said Chris Potter, who is also a PwC partner.

The report said industrial real estate will be the strongest category next year, although all sectors will show strength, including housing. However, while the home sale market will hold steady, new housing development is expected to cool, the study noted.

Across Canada’s top real estate markets, Vancouver was named as the highest-rated city for 2009, with Calgary and Edmonton also receiving high ratings for “investment prospects, development and for-sale housing.” The report also named Ottawa as one of the markets with a fairly strong score.

Out east, however, the property markets appear to be weak, with the report warning investors to be cautious when looking into the Maritime markets, except if they are “knowledgeable about the specific centres in this area.”

“In Saskatoon, the year-over-year increase was 5.5%, once again confirming a trend of deceleration in this city. One a month-over-month basis, new housing prices decreased 2.1% as Saskatoon builders continued to report difficult market conditions,” Statscan said.

On the West Coast, the 12-month increase for Vancouver was 1.4% and in Victoria, contractors’ selling prices increased 0.2% year-over-year, up from a 0.3% decline in August. New home prices were 4.3% higher in Ottawa-Gatineau, and 3% higher in Toronto and Oshawa, Ont.

In Quebec, new home prices were up 6.1%, while Montreal prices increased by 4.8%.

Bank of Montreal economist Douglas Porter had expected that, overall, new home prices would moderate to 2% year over year. He had suggested, as well, that new housing starts in October might slip below the 200,000 mark “as building permits are fading and builders have got to react to the steep slowdown in sales at some point.”

However, Canada Mortgage and Housing Corp. reported Monday that housing starts remained relatively strong, declining by 3.1% to 211,800 units in October from 218,600 in September.

“Housing starts remained strong in October and are consistent with our new home construction forecast for 2008,” Bob Dugan, Canada Mortgage and Housing Corp. economist Bob Dugan said in releasing the October figures.

“The slight decrease in housing starts is the result of declines in both single-detached and multiple starts in Ontario,” Mr. Dugan said.

For the first 10 months of 2008, actual starts in the rural and urban areas combined were down an estimated 1.6% from the same period last year.

The seasonally adjusted annual rate of urban starts was down 4.2% in October from the previous month. The biggest drop was in the number of starts for multiple-dwelling units, down 6% to 115,300. Urban single starts were down 1.1% to 69,300 in October.

Housing starts in urban centres were up in Quebec and Atlantic Canada, but down in British Columbia, the Prairies and Ontario.

Royal Bank of Canada economist Paul Ferley said in a research note that expectations had been for a “more pronounced drop” in overall housing starts across Canada.

The month-over-month decline is not surprising, given “the deteriorating housing affordability that commenced last year,” Mr. Ferley said, although the pace of the decline still remains “surprisingly muted.”

However, he added, tight credit conditions are expected to put “downward pressure on new construction through next year, with starts expected to average close to 180,000 in 2009.”

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Contact the Jeffrey Team for more information - 416-388-1960