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Calgary’s condo market booming as average price for single-family homes tops half a million

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Affordability issues are helping fuel the local condominium market which saw sales climb 14% in October from a year ago, the Calgary Real Estate Board said Monday.

Downtown living, where the living is small, but easy, seen as driving force in 2015 real estate

We are becoming a nation of city dwellers, but some worry what will happen when the new generation of homebuyers driving the trend outgrow their tiny condos. Find out more Condo sale increases from a year ago have reached double digits for six straight months and last month’s gains were credited for the city’s overall sales numbers being up 10% from October, 2013. The board’s benchmark index price for a single-family home reached $513,500 in October compared to $299,800 for a condo.

“While buyers can still find single-family product priced under this threshold in Calgary, the selection has consistently declined over the past four years,” said Bill Kirk, president of the board, in a release. “As our market moves into more balanced conditions, there has been a notable shift in the composition of the market. Not only do condominiums represent a larger share of total activity, but product availability by price range and property type has shifted.”

Related No matter what statistics show, Canada’s housing boom is about to end, experts say Even Canadian real estate companies don’t see much growth in home prices left Canada building permits soar to record on Toronto, Vancouver condos The board notes half of new listings in the condo market are priced at under $300,000, a level attracting consumers. “Tight rental market conditions combined with low mortgage rates have supported demand growth for condominium product in Calgary,” said Mr. Kirk, pointing to apartment sales setting a year-to-date record of 4,202. “Much of this demand is coming from both first-time homebuyers and investors.”

Condo listings are also on the rise, up 30% over the first 10 months of the year compared to a year ago. That pace, which is outstripping sales, has allowed inventory to rise and ultimately kept condo prices down.

Only the flip side, single family homes are becoming more expensive with only 18% of new single-family-home listings under $400,000 in October. By the end of the month, Calgary had only 387 single-family homes priced under $400,000.

“As our market moves into more balanced conditions, there has been a notable shift in the composition of the market. Not only do condominiums represent a larger share of total activity, but product availability by price range and property type has shifted,” said Mr. Kirk.

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Vancouver home sales jump 15% in October from a year ago and prices are still climbing, too

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The country’s most expensive market saw an almost 15% jump in October sales from a year ago, the Real Estate Board of Greater Vancouver said Tuesday.

The board said there were 3,057 sales in October, up from 2,661 sales a year earlier. Sales jumped 5.9% from September and were 16.6% above the 10-year average for October.

Prices also continue to rise with the board’s benchmark index up 6% from a year ago to $637,000.The average sale price of a detached home in the Vancouver area is now $1,250,557 but that’s still below the all-time high which was once close to $1.4-million.

“We’ve seen strong and consistent demand from home buyers in Metro Vancouver throughout this year. This has led to steady increases in home prices of between 4% and 8% depending on the property,” said Ray Harris, president of the board, in a statement.

New listings were up 4.4% in October from a year ago but dropped 14.7% from September. Detached homes were the exception with new listings dropping.

Related Steady as she goes for Canadian housing market in 2015, says CMHC CMHC admits ‘data gap’ in foreign ownership of Canadian real estate “Detached homes continue to increase in price more than condominium and townhome properties. This is largely a function of supply and demand as the supply of condominium and townhome properties are more abundant than detached homes in our region,” Mr. Harris said.

Detached home sales in October were up 19.1% from a year ago and 60.1% from two years ago. The benchmark price for detached homes was $995,100, a 7.9% increase from a year ago.

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Toronto housing market still on fire, adding heat to national debate

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Home prices rose across the Greater Toronto Area in October, matching similar gains in Calgary and Vancouver which should continue to inflate national housing numbers due out later this month.

The Toronto Real Estate Board said Wednesday the average sale price in the region in October was $587,505, an 8.9% increase from a year ago. While condominium price increases have slowed, low rising housing prices continue to rise with the average detached home selling for $951,746 in October, an 8.7% increase from a year ago.

“Strong growth in sales was evident across all major home types during the first full month of fall. This suggests that there are a lot of households across the Greater Toronto Area who remain upbeat about the benefits of home ownership over the long term, whether we’re talking about first-time buyers or existing home owners looking to change their housing situation,” said Paul Etherington, president of the board, in a release.

Related Vancouver home sales jump 15% in October from a year ago and prices are still climbing, too Calgary’s condo market booming as average price for single-family homes tops half a million Downtown living, where properties are small, but convenient, seen as driving force in 2015 real estate GTA sales were up 7.7% in October, gains that follow reports earlier this week that October Vancouver sales were up almost 15% from a year ago while Calgary condo sales jumped 14% during the same period.

Concern has been raised that those three markets may be skewing the national price figures which are due out on Nov. 15, a sentiment that even Joe Oliver, the finance minister, has expressed. The government has intervened four times to tighten mortgage rules, but Mr. Oliver has so far rejected further regulation.

In the Toronto market there are few signs of price growth slowing, with the exception of the condo sector which saw 2.5% year over year price growth for October.

It’s a much different story for low-rise housing. Detached home prices across the GTA rose 9.6% in October from a year ago while semi-detached and townhouses were up 8% and 9.5% during the same period, respectively.

Analysts have suggested provincial land use policy encouraging intensification have created the dichotomy between high-rise and low-rise housing in the GTA. The spread between low-rise home prices and condominiums prices has never been greater, according to Toronto builders.

“While sales growth has tracked strongly so far this fall, many would-be home buyers have continued to have difficulties finding a home due to the constrained supply of listings in some parts of the Greater Toronto Area, particularly where low-rise home types are concerned. The resulting sellers’ market conditions are forecast to drive strong price growth through the remainder of 2014 and indeed into 2015 as well,” said Jason Mercer, TREB’s director of market analysis, in a release.

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Home Capital grabs mortgage market share as Canada’s big banks shift to lower risk loans

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Home Capital Group Inc., Canada’s largest non-bank mortgage lender, is picking up loans banks are shunning amid tighter lending regulations.

The company reported originations rose 28% to $2.6 billion in the third quarter from a year ago. So- called traditional mortgage originations, which have loan to value ratios of 80% or less, jumped 35% to $1.8 billion from the previous year.

“We’re grabbing market share, some from the big banks,” Martin Reid, president of Toronto-based Home Capital, said by phone today. “Part of it is regulatory changes. Now people don’t qualify for insurance and banks may be less inclined to lend to them. The banks are just not set up for that type of underwriting.”

The banks are just not set up for that type of underwriting Home Capital is generating more business since the government began to tighten mortgage rules about five years ago and traditional lenders moved to lower risk exposure.

The Finance Department in 2012 reduced the maximum mortgage amortization period to 25 years from 30 years and cut the most homeowners can borrow against the value of their homes to 80%, among other changes. The Office of the Superintendent of Financial Institutions, Canada’s banking regulator, also introduced tougher standards for mortgage lenders.

Home Capital forecasts the trend will continue as the Bank of Canada and finance department seek to limit taxpayer exposure to a drop in home values through Canada Mortgage and Housing Corp., the nation’s government-owned mortgage insurer.

Related Toronto and Vancouver home prices pass Rome and close in on Paris Steady as she goes for Canadian housing market in 2015, says CMHC Any potential rule requiring banks to shoulder more risk or for CMHC to curb insurance would benefit Home Capital as the firm is able to tailor its lending for each loan, Reid said.

Home Capital dropped 7.1% to close at $51.60 in Toronto and has advanced 28% this year.

Home Capital third quarter net income rose to $73.8 million, up 11% from the same period last year. Profit excluding some items was $1.05 cents a share compared to the $1.06 cents a share estimate of 10 analysts surveyed by Bloomberg.

The company faced high development costs, traditional mortgage spread tightening and lower securitization gains, Fred Westra, an analyst at Industrial Alliance Securities, said in a note to clients.

Graham Ryding, analyst at Toronto-Dominion Bank, downgraded his stock rating to hold from buy today.

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Toronto and Vancouver home prices pass Rome and close in on Paris

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Canada’s two priciest cities for homes can now be included in an international class that is attracting foreign investors from around the world, says a new real estate study.

The report from CBRE says “prime” residential property in Toronto is now $1,225 per square foot while Vancouver is $1,368 per square foot. Those dollar figures have vaulted the city past some pretty impressive competitors like Rome and Milan. Similar property in Paris is $2,000 per square foot while the most expensive city in the study, London, comes in at $3,636 per square foot.

We’ve got some serious real estate here “We’ve got some serious real estate here. Very quietly we have climbed the global real estate ladder,” said Ross Moore, national research director for CBRE in Canada. “There are a whole bunch of reasons people are buying property but parking capital is one reason. You get your money out of Russia, get your money out of China. Pick your country. You want to diversify. In Canada, people want to educate their kids here so they want to buy somewhere for them to live.”

The question of how much foreign ownership is influencing the marketplace has been debated heavily in both cities. Evan Siddall, the president of Canada Mortgage and Housing Corp., told the Financial Post this month his research team is trying to get more information to fill in the “data gap” on what percentage of Canadian homes are being purchased by overseas buyers.

The CBRE study finds that foreign buyers are influencing markets around the world and specifically pointed to Toronto and Vancouver as attracting retirees looking for luxury, the only other Canadian cities referenced.

“Retirees are the new downsizers looking for a lifestyle change. This group are essentially empty nesters who are looking to trade grand estates for turnkey urban condos with instant luxury amenities,” says the report. “These buyers have been prominent in Canada for some time with luxury condos in Toronto and Vancouver becoming increasingly popular from this new segment.”

Related Toronto housing market still on fire, adding heat to national debate Vancouver home sales jump 15% in October from a year ago and prices are still climbing, too The CBRE report comes as new statistics from real estate boards in both locales show sales continue to climb with prices following. Toronto realtors are now calling for the large price gains we are seeing to continue well into 2015.

The Toronto Real Estate Board said Wednesday the average sale price in the region in October was $587,505, an 8.9% increase from a year ago. While condominium prices have slowed, the average detached home sold for $951,746 in October, an 8.7% increase from a year ago.

Tyler Anderson/National Post GTA sales were up 7.7% in October. “Strong growth in sales was evident across all major home types during the first full month of fall. This suggests that there are a lot of households across the Greater Toronto Area who remain upbeat about the benefits of home ownership over the long term, whether we’re talking about first-time buyers or existing home owners looking to change their housing situation,” said Paul Etherington, president of the board, in a release.

GTA sales were up 7.7% in October from a year ago, gains that follow reports earlier this week that Vancouver sales were up almost 15% during the same period.

Concern has been raised that Vancouver and Toronto, along with Calgary, are skewing the national price figures which are due out on Nov. 15, a sentiment that even Finance Minister Joe Oliver has expressed. The government has intervened four times to tighten mortgage rules and cool the market but Mr. Oliver has so far rejected further regulation.

Analysts have suggested Ontario’s provincial land use policy encouraging intensification has helped fuel prices for single-family detached homes in Toronto.

“While sales growth has tracked strongly so far this fall, many would-be home buyers have continued to have difficulties finding a home due to the constrained supply of listings in some parts of the Greater Toronto Area, particularly where low-rise home types are concerned. The resulting sellers’ market conditions are forecast to drive strong price growth through the remainder of 2014 and indeed into 2015 as well,” said Jason Mercer, TREB’s director of market analysis.

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Downtown living, where properties are small, but convenient, seen as driving force in 2015 real estate

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TORONTO — Homeowners who choose the convenience of city life over the more generous living space in suburbia are driving Canada’s real estate market, according to a new report jointly produced by consultancy PricewaterhouseCoopers and the non-profit Urban Land Institute.

The annual outlook on emerging real estate trends says the move downtown, which has emerged in the past few years, will continue as more Canadians decide to stay in or move back to urban cores.

Much of this is due to changing demographics as young families and millennials forgo the white picket fence and house in the suburbs to take advantage of downtown living, where properties are smaller but offer more conveniences, said the 112-page report released Tuesday.

According to Statistics Canada, the most recent numbers available show that the population of urban centres grew 7.1% between 2006 and 2011.

Frank Magliocco, Canadian real estate leader at PricewaterhouseCoopers, said there are a number of factors behind the urban growth, including that Canadians are more aware of the environmental costs associated with urban sprawl as well as the cost in time and money of lengthy commutes.

As well, provincial land use regulations that protect green spaces — for example Toronto’s Greenbelt involving about 800,000 hectares of protected land from Peterborough, Ont., to Niagara Falls, Ont. — have made it more difficult to find land to develop and has pushed an explosion of condominium growth in major cities.

But one of the concerns is what will happen to these urban properties once the younger generation grows out of them.

“This continuing urbanization trend has fuelled the condo boom in Toronto and other cities, but some question what will happen as the lifestyles of today’s young urban singles and couples change. Will they move out of the city core in search of larger homes, schools and services, or will they — like their counterparts in other parts of the world — simply adapt to smaller living spaces?” the report asks.

Magliocco said Canadian cities will either go the way of New York, where families are willing to sacrifice space to live in the city, or the way of London, where families are used to living outside the city and commuting downtown for work.

The rapidly growing condo markets in cities such as Toronto and Vancouver have also raised concerns about an oversupply of units and whether the boom is overly weighted towards wealthy, foreign investors who lease the units to others.

Meanwhile, an expected rise next year in interest rates from historically low levels may also influence demand in the housing market.

However, among the 1,400 people interviewed and surveyed for the report, which included private property investors and developers, commercial developers and real estate service firms, the consensus was that the Canadian market is strong enough to weather a bump in mortgage rates.

“The improvement in the U.S. economy indicates that higher rates could be coming, but the economic stability in Canada and the United States will continue to attract foreign capital,” said the report. “In addition, retiring baby boomers are likely to flood the market with private capital as they look to turn stock options and retirement packages into stable, income-generating assets.”

Overall, the report sees developers responding to the needs of downtown dwellers by building more mixed-used properties, which include residential and retail space.

“Looking ahead, we can expect to see more and more retail and services along the streets of Canada’s city cores and along major transit arteries, especially where new developments predominate. Major brands are likely to move into these new spaces, too — though with new formats and smaller footprints,” said the report.

The report also noted that Calgary, Edmonton and Vancouver, will see the most residential growth in 2015, a trend that has been helped by more jobs becoming available in the West than in Central Canada, while Calgary and the Greater Toronto Area will hold the most potential for retail growth.

‘I did mess up’: Even the experts admit mistakes on picking a mortgage

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It can’t be easy for a certified financial planner to admit this, but Ted Rechtshaffen admits he blew it on his last mortgage.

“I was wrong. I had a variable rate mortgage and in 2009 I pulled the plug and went fixed,” said the president of TriDelta Financial in Toronto, joking about how his rate was 75 basis points off of prime and would amount to 2.25% today. “I did mess up, but my question was what benefit do I get locking-in versus going variable?”

You can hardly blame him for thinking rates were going to increase. Variable rates are generally tied to the Bank of Canada’s overnight lending rate and most so-called experts, even the most renowned economists, have called for the central bank to raise rates. They were all wrong. The last time the overnight rate moved was September 2010.

Mr. Rechtshaffen said the gap between a variable rate mortgage and a five-year fixed rate mortgage was just 25 basis points, making his decision at the time less difficult. Most of the time variable does beat fixed, something pointed out in a now well-quoted study by York University professor Moshe Milevsky who found that over 50 years floating rates saved you money about 90% of the time.

His study didn’t include the current rate environment in which fixed rates have hovered around 3% the past few years, a period when there’s been no movement on the variable rate. The website ratespy.com suggests the lowest variable rate on the market is now 2.10% while the lowest five-year rate is 2.65%. The average variable rate is roughly 2.4% compared to 2.94% for the five-year.

Rates could move very fast once they go up

Basically, you’re saving 55 basis points on a mortgage. Based on a $500,000 mortgage with a 25-year amortization, that 2.94% mortgage would require a monthly payment of $2,350.86 and result in $67,923.39 in interest over five years. At 2.4% your monthly payment drops to $2,215.01 and the total interest is only $55,229.04.

Mr. Rechtshaffen said there are really two points to consider when deciding whether to lock-in: what is the gap; and what you think is going to happen to rates.

In some ways it comes down to how much are you going to pay to buy what amounts to an insurance policy that your rate won’t go up? How big does the gap have to be for you to switch to variable?

“To me, I think you have to be getting three quarters to 1% [savings] in today’s environment. Rates could move very fast once they go up,” Mr. Rechtshaffen said.

Ultimately you can take that conservative planning too far and lock into a 10-year mortgage, a term with rates well above 4%. That makes it a very expensive product.

Rob McLister, editor of Canadian Mortgage Trends, said he rarely sees people lock in to a 10-year mortgage because rates are so much lower for other products.

The other thing to consider is that while prime may not move because of the Bank of Canada’s insistence on keeping rates steady, there’s nothing to say the discounting off of prime won’t grow. It has in the past with consumers getting up to one percentage point off.

“Before the Fed taper talk began in summer 2013, we were steering variable-rate shoppers out of variables and into one-year fixed rates, Mr. McLister said. “There was a high probability of variable discounts improving. This saved people interest for one year, after which they were able to switch into a better floating rate.
“Since then, variable pricing has improved as expected. Barring a global crisis of some kind, we could see another 10-15 basis point improvement through 2015. If that happens, you’ll see brokers advertising prime minus 0.90% or below next year.”

Will Dunning, the chief economist with the Canadian Association of Accredited Mortgage Professionals, said the biggest determinant of whether to go short or long is where you are in the home ownership cycle.

“When there is zero spread, people lock in but people’s history is more important. When you buy your first home, you’re very cautious and you go for five-year fixed,” Mr. Dunning said. “The older you get and the longer you’ve been in your house you are more likely to go variable rate.”

A survey by CAAMP last year found about 28% of the market had gone into a variable rate product compared to 65% who were fixed and another 7% who had a mixed product.

Mr. Dunning said when the spread between variable and the five-year fixed has been more than 100 basis points, and even closing in on 200 basis points, you will see a strong movement into a variable rate product because of the temptation of interest savings which outweighs the risks of rising rates.

So what would Mr. Rechtshaffen do today? “I just renewed my mortgage and went with five-year fixed,” he said.

Will it cost him money? Maybe. “But I’m happy to have a rate locked in and not worry about them going up,” he said.

Illustration by Chloe Cushman, National Post

Steady as she goes for Canadian housing market in 2015, says CMHC

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OTTAWA – The Canada Mortgage and Housing Corp. says it expects housing starts in 2015 to be about the same as they were this year, and in line with economic and demographic trends.

The national housing agency says “some moderation is expected” in 2016.

The CMHC says that on an annual basis, it expects housing starts to range between 186,300 and 191,700 units in 2014, with a point forecast of 189,000 units.

Next year, the agency says it expects housing starts to range between 172,800 and 204,000 units, with a point forecast of 189,500 units.

In 2016, the CMHC says it expects housing starts to range between 168,000 and 205,800 units, with a point forecast of 187,100 units.

The agency says it expects Multiple Listings Service sales to range between 467,400 and 482,000 units in 2014, with a point forecast of 476,100 units.

Next year, it says it expects MLS sales to range between 457,300 and 507,300 units, with a point forecast to 482,500 units.

The CMHC says the average MLS price in 2014 is expected to be between $401,600 and $405,400, with a point forecast of $404,800.
Next year, the agency says it expects the average MLS price to be between $403,600 and $417,800, with a point forecast of $410,600, while in 2016 the average MLS price is forecast to be between $407,300 and $424,500, with a point forecast of $417,300.