GTA March Home Sales Fall 40% From 2017: TREB

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Early spring real estate conditions continue to fall short by double digits from the records broken in 2017, as March data reveals a nearly 40-per-cent plunge in sales.

The report from the Toronto Real Estate Board states only 7,228 homes changed hands last month, compared to 11,954 the previous year. That follows two consecutive months of declines since the start of 2018, and is down 17.6 per cent from the 10-year average.

The number of homes listed for sale also tightened 12.4 per cent, with 14,866 homes placed on the market. However, despite less choice, buyers are enjoying softer, more wallet-friendly home prices, which have dropped 14.3 per cent from last year’s high, to an average of $784,558.

Board Says Slower Activity is Expected

Slower sales and price activity is par for the course in early 2018, falling in line with what the real estate board had predicted for the first quarter, says TREB President Tim Syrianos, who points to the ongoing adjustment period to new real estate and mortgage regulations implemented last April and this January.

“TREB stated in its recent market outlook report that Q1 sales would be down from the record pace set in Q1 2017,” he stated in the board’s release. “The effects of the Fair Housing Plan, the new OSFI-mandated stress test and generally higher borrowing costs have prompted some buyers to put their purchasing decision on hold. Home sales are expected to be up relative to 2017 in the second half of the year.”

Lower home prices can largely be attributed to falling detached home values – the most expensive housing type, and the hardest hit by the new regulations. The luxury market has also declined considerably, with half as many sales for homes in the $2-million-and-up range.

A Tale of Two Markets

Jason Mercer, TREB’s director of market analysis, says it’s no surprise this spring season pales in comparison to last, when the GTA market was gripped by unsustainable price growth and record-breaking sales.

“Right now, when we are comparing home prices, we are comparing two starkly different periods of time: last year, when we had less than a month of inventory versus this year with inventory levels ranging between two and three months,” he says. “It makes sense that we haven’t seen prices climb back to last year’s peak. However, in the second half of the year, expect to see the annual rate of price growth improve from Q1, as sales increase relative to the below-average level of listings.”

Month Over Month Shows Continued Recovery

It may be a weaker start to the 2018 market, but shorter-term data indicates sales and price growth are already heating up, signalling a competitive spring season. Sales and prices are ramping higher across all home types from February, with the exception of condo townhouses, with saw slight price declines from the previous month.

Detached home sales surged in March, up 31 per cent in the total TREB area, and 39 per cent in the City of Toronto, and relatively flat price growth, at 3 and 0 per cent, respectively.

Semi-detached homes saw the greatest uptick in demand in the 416, with 55 per cent more changing hands and 6-per-cent price growth compared to February, and up 25 per cent in the TREB region, with prices rising 5 per cent.

While sales for condo townhouses remain robust, up 38 per cent in both the TREB and 416 regions, prices softened slightly, at 1 and 8 per cents. Condos continue to perform steadily, with sales increasing 28 and 27 per cent in TREB and 416, and prices up 4 and 5 per cents.

This uptick has returned the City of Toronto back to a sellers’ market, compared to the mostly balanced and buyers’ conditions found throughout the TREB-tracked markets. This is determined by the region’s sales-to-new-listings ratio, which indicates how many of the newly-listed homes for sale are being sold. A ratio between 40 – 60 per cent is considered balanced, while ratios below and above that range indicate buyers’ and sellers’ conditions, respectively.

© 2015-2017 Zoocasa Realty Inc.

Consumers reveal feelings about economy

Theophilos Argitis
REP

It’s been a dramatic reversal in sentiment for Canada’s consumers.

The Bloomberg Nanos Canadian Confidence Index — a composite gauge based on survey questions — continued to tumble in March, dropping to the worst month-end reading in more than a year as households grow increasingly concerned about the durability of the economic expansion.

The index ended the month at 56.8, the lowest since January 2017. Consumer sentiment has now declined every month this year, driven lower by worries over growth, with almost one-in-three Canadians anticipating the economy will weaken over the next six months.

Over the past three months, the drop in confidence from near-record highs reflects a deterioration in financial conditions for households. That includes rate hikes by the Bank of Canada, a weakening Canadian dollar, sharp declines in stock prices and renewed worries about the housing market.

Combined with a slowing economy, an inter-provincial dispute over Kinder Morgan Inc.’s Trans Mountain pipeline between Alberta and British Columbia, and risks associated with outlook for the North American Free Trade Agreement, consumer angst is on the rise.

“We’re dealing with a one-two negative punch of trade uncertainty and energy uncertainty,” said Nik Nanos, chairman of Nanos Research Group. “There is too much unfinished business related to Nafta and Kinder Morgan.” The data also suggest Prime Minister Justin Trudeau failed to generate any boost in sentiment from his budget last month, Nanos said.

The three-month drop in sentiment is one of the largest reversals for the confidence index since weekly tracking by Nanos began in 2013. The index is down 3.2 percent from year-ago levels.

Consumer confidence can be a good barometer of an economy’s overall health. If sustained, the current deterioration in sentiment is consistent with a slowdown in growth of well below 2 percent on an annualized basis.

The Bloomberg Nanos Canadian Confidence Index is based on a four-week rolling average of 1,000 telephone respondents, who are asked questions about whether they are positive or negative about their personal finances, job security, the outlook for the economy and real estate prices. The survey has a margin of error of 3.1 percentage points.

The weekly tracking shows the drop in sentiment occurred at the beginning of the month, with sentiment stabilizing in the second half of March.

Pessimism

The percentage of Canadians giving the most pessimistic responses has jumped to 19.1 percent, versus 14.2 percent at the end of 2017 and 16.7 percent in March last year. The pessimism index, which is even more strongly correlated to GDP data, posted its first year-over-year gain since November 2016.

The decline continues to be driven by waning expectations for the economy, rather than pocketbook issues. Only 18.3 percent of respondents said they expect the economy to strengthen over the next six months, down from 30.5 percent at the end of 2017. The share of Canadians expecting a weaker economy has increased to 30.9 percent, from 19 percent three months ago.

Personal finances and the outlook for real estate have largely been stable or better since January. Job security levels though are showing signs of weakening, which is surprising given how strong the labor market has been, with the jobless rate sitting at a four-decade low.

The share of Canadians who say their job is secure was at 64.1 percent, the lowest rate since March last year. The percentage who say their job is at least somewhat not secure touched 14.3 percent, the highest month-end reading in two years.

Regionally, Alberta recorded declines in sentiment in March, possibly reflecting the pipeline dispute. Quebec posted the highest confidence levels in the country, and is one of only two regions — the other is British Columbia — where sentiment is above year-earlier levels. 

Copyright Bloomberg News

Copyright © 2018 Key Media Pty Ltd

If the government plan was to gut sales in Metro Vancouver?s most expensive detached housing markets, it has been a spectacular success

Frank O’Brien
Western Investor

 

A sustained attack on buyer demand in Vancouver’s detached housing market has decimated sales and is leading to “unbelievable” price reductions. If government plans were to crush sales in the city’s premiere residential market it has been spectacularly successful, according to recent real estate data and frontline agents.

“Detached house sales on Vancouver’s west side are down 70 per cent in the first three months of this year as compared to 2016,” said Brent Eilers of Re/Max Masters Realty of West Vancouver, who has been active in the local real estate market since 1983. 

West Vancouver detached sales, estimated at 59 so far this year, are now at the lowest level in 30 years, he added. 

“As Don Meredith from Monday Night Football used to say ”turn out the lights, the party is over,” Eilers said. 

The party ended early, he said, for high-end builders and investors, with sale prices for Vancouver detached houses priced at $5 million or more down 15 per cent to 18 per cent this year compared to 2017.

There were 2,517 home sales in March across the Metro Vancouver region, the Real Estate Board of Greater Vancouver reported. That’s nearly 30 per cent lower than the same month a year ago, and around half the number of transactions in the heady days of March 2016. It’s also 23 per cent below the 10-year average sales for the month.

In February, the B.C. government introduced Canada’s first foreign-home buyer tax, and added restrictions on assignment sales of Metro Vancouver residential real estate transactions. 

In February 184 Vancouver westside detached houses were listed for sale on the MLS of the Real Estate Board of Greater Vancouver at $3 million or more. 

Just 13 of them sold.

Overall, the benchmark price of a detached house on Vancouver’s westside last month was $3.4 million, down an average of 2 per cent – that is $68,000 – from three months earlier.

Eilers suggests that many of Vancouver detached houses are now selling for less than assessed value, set on the valuation date of July 1 2017.

He, and other agents, say the crunch will come this spring with the traditional flood of listing onto the market as the first-quarter statistics are released.

“It will be hard to hide what is really happening,” Eilers said.

Eilers said the federal government stress test and higher mortgage rates have frozen first-time buyers out of the market, while B.C.’s foreign buyer tax, school tax and speculation tax have driven away foreign buyers. “So, unlike in other downturns, we don’t have fresh money coming into the market.” 

The B.C. school tax alone works out to an extra $2,000 for the first $1 million in value in excess of $3 million and $4,000 per million on assessed values of $4 million or more. If a foreign buyer were to purchase a $4 million Vancouver house this month, for instance, he or she would face a tax bite of at least $806,000; $120,000 more if the house was left vacant, due to the provincial speculation tax and Vancouver’s empty home tax.

“We saw less demand from buyers and fewer homes listed for sale in our region in the first quarter of the year,” said Phil Moore, the newly appointed REBGV president. “High prices, new tax announcements, rising interest rates, and stricter mortgage requirements are among the factors affecting home buyer and seller activity today.”

Eilers provided examples of expensive Vancouver houses that have seen dramatic price reductions, including a South Granville house that was listed for $11.9 million October 2017 and sold in February for $9.9 million; and a Shaughnessy house, listed last fall for just under $12 million that sold last month for $8.4 million.

The lower end is also being affected, agents say.

“We are seeing unbelievable price drops,” said David Richardson, a veteran agent with Re/Max Crest Westside. He estimated some Kitsilano detached house sellers listing in the $2 to $3 million range have taken a 20 per cent to 25 per cent haircut on recent prices compared to two years ago.

Across Vancouver, it now takes an average of 50 days for a detached house to sell, more than twice as long as two years ago before the government intervention and higher taxes began. Some Vancouver detached house sellers, Eilers suggested, will be forced to bite the bullet. 

“You cannot be down catastrophically in sales and not eventually have an affect on prices,” Eilers said. 

© Copyright 2017 Western Investor

Tallest residential tower set to change skyline

Natalie Wong
Canadian Real Estate Wealth

Broccolini Construction Inc. plans to invest as much as C$300 million ($233 million) to build the tallest residential tower in Montreal.

The closely held firm will transform 600,000 square feet of downtown city space into a 56-story mixed-use tower, said Roger Plamondon, president of real estate development and acquisitions at Broccolini. Eight stories will be allocated to office and retail space; the rest of the building will contain about 400 condominium units.

The new tower will dethrone Broccolini’s recently completed 50-story mixed-use building, dubbed L/Avenue, as the tallest tower of its kind in the city.

“It’s the future of real estate as a rule,” Plamondon said in an interview at Bloomberg’s Montreal office. “By necessity you’re moving into mixed-use. We’ve been very successful and we have a very good ear to what the market is looking for so we’ve adapted our mix.”

Developers are racing to Amazon-proof their businesses by reducing mall exposure and turning to a mix of retail, condos and offices. The tech sector has helped drive tenant demand for office space to a record in Montreal in 2017, according to CBRE Group Inc. The city, with its mix of old cobblestone charm and relaxed vibe, is the country’s third-hottest commercial market with C$3.5 billion in transactions in the first three quarters of last year.

The housing market is also heating up as capital is shifting from over-priced markets in Toronto and Vancouver.

Broccolini plans to start marketing the building this fall and complete construction at the start of 2023, Plamondon said.

The residential tower will be located next to the largest office tower to be built in Montreal in 25 years — the new headquarters of National Bank of Canada which is slated for occupancy in 2022. National Bank will invest more than C$500 million ($402 million) in the building which will also be built by Broccolini. The plan so far is to build a park between the two sites as well as an underground path.

Copyright © 2018 Key Media Pty Ltd

International online retailer selling Canadian houses like shoes

Neil Sharma
Canadian Real Estate Wealth

Chinese real estate portal Juwai—which collects staggering quantities of data on Canadian housing—has struck a deal with online retailer JD.com to start selling homes like shoes.

Juwai markets overseas properties to buyers in China’s Mainland and, according to a JD.com statement buyers can view houses listed for sale “like milk, shoes and other household goods.”

In addition to Canadian real estate, home listings from Australia, the U.K. and U.S. will also be advertised on JD.com—all popular markets for Chinese investors.

JD.com, which is often referred to the Chinese equivalent of Amazon, made a special request for Canadian real estate because of how popular of a commodity it’s become among Chinese consumers.

China forbids capital outflow exceeding USD$50,000, but it’s in the midst of loosening such restrictions and retailers like JD.com—China’s second-largest retailer after Alibaba—are champing at the bit.

However, news about the deal between Juwai and JD.com is bound to inflame tensions between domestic and foreign buyers, whom believe responsible for rising unaffordability.

Countries like New Zealand, Britain, Australia, Switzerland and Singapore, to name a few, have taken measures to protect their housing markets from foreign speculators, while Canada has steep foreign buyer taxes in its two most expensive real estate markets.

Copyright © 2018 Key Media Pty Ltd

Steve Randall
Canadian Real Estate Wealth

The still-rising prices of homes in many Canadian markets are making homeownership increasingly unaffordable and mortgages harder to secure.

A report on the Canadian housing market in the fourth quarter of 2017 has been published by credit bureau DBRS and highlights the tough conditions facing first-time buyers in particular.

The amount of debt being serviced by Canadian households is running at double the average for a government backed mortgage.

The average household has an estimated gross debt service ratio (GDSR) of 54% while the average GDSR for homebuyers with a CMHC-insured mortgage is 27%.

Excluding the Greater Vancouver and Greater Toronto areas, GDSR is estimated to be 40% on average.

The report says that the surge in home prices is making it hard for average Canadians to qualify for an insured mortgage, while its figures reveal the high deposit needed for an uninsured loan.

DBRS estimates that to buy a detached home with an uninsured mortgage, a buyer would need a 53% down payment, with 37% for a semi-detached home, and 26% for a condo.

Overall, the report says that credit quality in Q4, 2017 was good although there are regional differences. Nationally, arrears remain low and potential losses on defaulted mortgages can be mitigated by the high net worth of 870% of disposable income and high real estate equity ratio of 74%.

Copyright © 2018 Key Media Pty Ltd

Neil Sharma
REP

British Columbia’s Finance Minister Carole James may have announced amendments to the speculation tax, easing the levy on out-of-province Canadians, but Royal LePage says not enough was done and it anticipates damage to the province’s housing sector.

“There will be a big problem for the economy in B.C. if Albertans go away,” said Phil Soper, Royal LePage’s CEO. “They own a lot of real estate in British Columbia, and have forever.”

Royal LePage’s advisor survey determined that British Columbians would bear the brunt of the speculation tax, which is set at 2% for non-residents and half of that for out-of-province Canadians.

“What they’re saying is the impact on the British Columbian economy and properties will be negative and they’ll bear the brunt of the new tax regime,” said Soper. “Number two is Canadians—mostly Albertans—and number three is foreign buyers.”

James recently announced that out-of-province Canadians can avoid the 1% tax by renting out their properties.

But according to Soper, major British Columbian cities like Kelowna will take a major hit.

“The tax was brought in to target home flippers and foreigners, but in fact it will be British Columbians and other Canadians. This is very troubling for local residents in cities like Kelowna. Approximately 15% of property in Kelowna is owned by Albertans, and an exodus would hurt the economy and property values, and people in Vancouver who own property there will want to sell because they don’t want to be stuck with devalued property. It was more harmful than intended.”

Sotheby’s International Realty Canada’s president and CEO Brad Henderson says that, while the details released by James are still murky, he expects a dampening effect on residential real estate in the province, including in its luxury market.

“Some significant investors in B.C. real estate are Calgarians, and Albertans in general, and this will be a penalization for them,” said Henderson. “I think there will definitely be a decrease in activity, meaning the number of homes bought and sold, and a decrease in the number of people who need to sell their homes. There will also be a dampening in prices over next little while, but it’s tough to say by how much.”

Copyright © 2018 Key Media Pty Ltd

Steve Randall
REP

The tax changes announced by British Columbia will have a major impact on the province’s housing market according to brokers.

A survey of 535 real estate professionals in BC and Alberta carried out by Royal Le Page found that most expect the measures designed to target foreign investors will also hit those who own second homes.

Although the government says the number of local homeowners who will pay the speculation tax will be less than 1%, the poll found that 85% of advisors say confidence in the BC housing market has been dented.

More than three-quarters say there will be a decrease in sales in the three months following announcement of the tax change, and 57% say prices will decrease.

“The expected impact of the proposed housing taxes announced in British Columbia should not be taken lightly,” said Phil Soper, President and CEO, Royal LePage. “Homeowners across the province will feel the effects as major policy changes like this are also amplified by a drop in consumer confidence. We saw this happen in 2016 when the previous government launched a tax on foreign investors. A small number of international purchasers withdrew from the market – along with a huge cohort of domestic homebuyers.

He added that buyers across Canada were already impacted by the tighter mortgage regulations and rising costs.

Around 77% of respondents said that international buyers will be deterred by the additional tax, 45% said that BC residents will be most affected.

“We expect that the new taxes will materially impact communities that rely on recreational property markets for the health of their local economy,” said Soper. “There will be some Canadians in British Columbia and across the country that will choose to sell their properties in the province as the new taxes add to the cost of homeownership.

In Alberta, 80% of advisors said that interest in BC property would be damaged by the new tax.

Copyright © 2018 Key Media Pty Ltd