Canada housing starts drop in August

Fergal McAlinden
other

A decline in multi-unit urban starts contributed to a slower month overall, said CMHC

Canadian housing starts were down 3% in August over the previous month, a trend that was driven by a decline in multi-unit urban starts, according to Canada’s national housing agency.

Canada Mortgage and Housing Corporation (CMHC) said August saw a seasonally adjusted annualized rate of housing starts of 267,443 units compared with a revised 275,158 units in July, with that multi-unit urban start drop cancelling out a slight increase in single-detached starts.

The latter saw 59,169 unit starts, up 1% over the previous month, with multi-unit urban starts having posted a 4% decline to 187,602 units. Rural starts came in at a seasonally adjusted annual rate of 20,672 units.

In remarks accompanying the news, CMHC chief economist Bob Dugan said housing starts activity in Canada remains elevated by historical standards, trending at well above 200,000 units since 2020.

Vancouver saw a decline in single-detached units offset by higher multi-unit starts, with Toronto recording strong increases across the board and Montreal registering a 33% drop in multi-unit starts, according to CMHC.

 

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Housing starts decline almost 3%, amid concerns about supply

Shantae Campbell
other

Industrial leads drop in CRE transactions across Lower Mainland

Western Investor Staff
The Vancouver Sun

With a 34 per cent decline in property deals, total commercial real estate sales volume in the second quarter fell to $3.26 billion

 A 3.4-acre industrial site in Coquitlam, B.C, sold in the second quarter 2022 for $24 million. | PC Urban Properties

Activity in the Lower Mainland’s commercial real estate market edged down in the second quarter (Q2) of 2022 from the brisk sales pace experienced at the start of the year.

There were 485 commercial real estate sales in the Lower Mainland in Q2 2022, a 34.3 per cent decrease from the 738 sales in Q2 2021, according to data from Commercial Edge, a commercial real estate system operated by the Real Estate Board of Greater Vancouver (REBGV).

The total dollar value of commercial real estate sales in the Lower Mainland was $3.26 billion in Q2 2022, a 12.2 per cent decrease from $3.71 billion in Q2 2021.

“With inflationary pressures driving interest rates and borrowing costs higher, commercial activity across most market segments has slowed since the start of the year,” said Andrew Lis, REBGV’s director, economics and data analytics. “Land deals remain elevated relative to the last few years, which is unsurprising given the robust demand for new housing supply in the Lower Mainland.”

Q2 2022 activity by category

Office and retail: There were 143 office and retail sales in the Lower Mainland in Q2 2022, which is down 48.9 per cent from the 280 sales in Q2 2021. The dollar value of office and retail sales was $649 million in Q2 2022, a 25.4 per cent decrease from $870 million in Q2 2021.

Industrial: There were 93 industrial land sales in the Lower Mainland in Q2 2022, which is a 49.2 per cent decrease from the 183 sales in Q2 2021. The dollar value of industrial sales was $542 million in Q2 2022, a 12 per cent increase from $484 million in Q2 2021.

Multi-Family: There were 28 multi-family land sales in the Lower Mainland in Q2 2022, which is down 12.5 per cent from 32 sales in Q2 2021. The dollar value of multi-family sales was $404 million in Q2 2022, a 20.9 per cent decrease from $511 million in Q2 2021.

Land: There were 221 commercial land sales in Q2 2022, which is a 9.1 per cent decrease from the 243 land sales in Q2 2021. The dollar value of land sales was $1.67 billion in Q2 2022, a 9.9 per cent decrease from $1.85 billion in Q2 2021.

 

© 2022 Western Investor

Kelowna 9,583-square-foot retail site sells $100,000 over list

Western Investor Staff
Western Investor

The free-standing downtown site on 0.22 acres with two rental units also sold for nearly $440,000 above its appraised value, at $1.4 million

Re/Max Kelowna – MCL Real Estate Group, Kelowna, B.C., for Western Investor

 

Property type: Retail

Location: 203-207 Rutland Road North, Kelowna B.C.

Property size: 3,420 square feet

Number of units: 2

Land size: 9.583 square feet

Size of land in acres: 0.22 acres

Zoning: C4 – Urban centre commercial

BC Assessment value: $961,000

List price: $1.3 million

Sale price: $1.4 million

Date of sale: August 30, 2022

Brokerage: Re/Max Kelowna – MCL Real Estate Group, Kelowna, B.C.

Broker: Kris McLaughlin.

 

© 2022 Western Investor

Downtown office market stabilizing but tenants are staying nimble

Peter Mitham
Western Investor

Flexible leases in demand as economic outlook calls for caution

Downtown Vancouver office space is enjoying a stabilizing environment, says Avison Young.Chung Chow
While the second half of 2022 has been beset by uncertainties driven by high inflation and rising interest rates, Avison Young’s review of the Vancouver office market during the first half of the year points to a stabilizing environment.
Metro Vancouver saw office vacancies fall to 7.8 per cent during the period, down from 8.4 per cent a year earlier. While companies continued to adjust their space requirements as workers began returning to offices, net absorption in the period totalled 561,260 square feet.
“If you look at absorption in your AAA and A-class product, it’s still very healthy,” said Ronan Pigott, executive vice-president, office leasing with Avison Young, noting that the leasing market remains active.
During the remainder of the year, Avison Young expects to see an additional 1,377,673 square feet of absorption across Metro Vancouver.
Downtown, all classes of space are benefitting from the newfound confidence, unlike a year ago when B and C-class space were seeing elevated vacancies.
“It appears that the surge of sublease offerings attributable to COVID-19 are abating and current and emerging vacancies are a result of delivery and lease-up of new inventory,” Avison Young stated in its report. “Market statistics indicate that vacancy is spread more evenly among all building classes relative to 12 months ago when vacancy was more concentrated in class B and C buildings.”
While they’re still the most impacted by companies right-sizing, Avison Young doesn’t foresee a surge in sublease space due to economic uncertainties that was seen in the depths of the pandemic. Hybrid work arrangements are keeping in-person space requirements in check, creating the opportunities for expansion if the economy heats up and in-person work intensifies.
“While the full impact of the hybrid office space is yet to be realized, there are positive signs of recovery,” Avison Young reported. “Tenants will likely be desiring options such as flex-space and the ability to modify office space without requiring a large renovation.”
“There’s a chance that they’ll revisit and determine that they will actually need more space than they’ve actually committed to,” Pigott said.
The churn in the market is likely to continue through 2023, though at a low level rather than in the form of massive opportunities.
According to Avison Young, space available for lease but not yet vacant accounts for about 2.5% of the downtown office inventory, or 590,000 square feet. This is an improvement over the 755,000 square feet available over and above the actual vacancy rate a year ago.
Sublease offerings could increase if the economic outlook worsens, however.
While most large tech companies have their own in-house real estate teams, smaller companies are more vulnerable to shifts in the larger market. With some shaping up as acquisition targets, consolidation as driven by economic pressures could free up space and create opportunities for prospective tenants.
“M&A activity in the tech sector has brought more attention to Vancouver and shall continue to increase in 2022, which always results in new “grey market” opportunities coming available which can provide welcome relief to tenants searching for new space,” JLL reported in its own review of the Metro Vancouver office market.
JLL noted that sublet space was showing signs of increasing at the end of the second quarter, rising by 100,000 square feet. It expects more will follow.
“A rest is happening in many markets, and Metro Vancouver will likely feel the impacts with the return of some large blocks of premises,” it said. “There will be continued requirements from occupiers for flexibility in their leases, including shorter terms, surrender options, contraction options and expansion options.”

© 2022 Western Investor

Saskatchewan residential sales exceed 10-year average

Jaryn Vecchio
Western Investor

Sale prices are increasing in many communities as listings remain low

Residential property sales across Saskatchewan continue to be down from last year but that doesn’t mean the sector is struggling.

According to the Saskatchewan Realtors’ Association (SRA), most communities are seeing sales numbers higher than what they’ve been averaging over the past 10 years. Regina and Saskatoon, unsurprisingly, lead the way for the province.

Included in the list are North Battleford, Meadow Lake, and Humboldt.

Three communities have sale numbers below the 10-year average: Prince Albert, Melfort and Weyburn.

Prince Albert was the closest to its average, 306, as there’s been 304 sales through the first eight months of the year.

Fifty-eight properties were sold in Melfort between January and August with the average sitting at 64.

As for Weyburn, the city saw 101 sales with its 10-year-average being 112.

The SRA believes lower sales numbers may be because there are less properties to buy.

“Supply remains a challenge in the market and while we are seeing some signs of improvement, the gains are in the upper end of the market and have not offset the declining supply of more affordable homes,” SRA CEO Chris Guérette said. “Higher lending rates are having a cooling impact on demand, but the challenge continues to be having enough supply available in the lower price ranges in our market.”

The average price for property in Melfort is only about $100 more than what each sale brought in over the past 10 years.

North Battleford is the only community where the SRA noticed a decrease in price. The average cost for properties sold in 2022 is around $3,000 less than what those over the past 10 years averaged.

Every other community is seeing a sizable increase with those buying properties in Meadow Lake having to pay, on average, around $51,000 more.

 

© 2022 Western Investor

CREA slashes 2022 home sales forecast

Fergal McAlinden
other

Prices will also fall further than previously expected, association says

The Canadian Real Estate Association (CREA) has cut its forecast for home sales in 2022 and indicated lower price growth expectations amid a protracted housing market cooldown.

The association said the number of properties sold via Canadian MLS systems this year will likely fall by about 20% compared with 2021, with just over 532,500 sales anticipated.

Those projections, revealed in its latest housing market outlook, reflect a starker forecast than its previous report in June. Then, CREA said the national average home price would increase 10.8% this year and sales would fall by 14.7%.

The association’s chair, Jill Oudil, said in a press release that national home sales in August had held steady month over month for the first time since February, a development that could provide an early sign that the “sharp adjustment” across many markets may be nearing an end.

Read next: What will more rate hikes do to Canada’s housing market?

Still, she said some would-be buyers would still opt against purchasing a home despite recent price declines as they wait for prices to potentially fall even further.

“Some buyers may choose to remain on the sidelines until they see clearer signs of borrowing costs and prices also stabilizing,” she said.

Seasonally-adjusted home sales in August were 36,914, just 1% lower than July – although the actual number of home sales (38,368) was notably down compared with the same time last year, by nearly 25%.

 

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Canada’s average home price down 3.9% in August from same month in 2021

Shantae Campbell
The Vancouver Sun

Home sales, meanwhile, edged down just 1% between July and August
A realtor’s sign outside a house for sale in Toronto. Photo by Chris Helgren/Reuters files
The average price of homes sold in Canada in August fell 3.9 per cent from the same month last year to $637,673 according to statistics released Thursday by the Canadian Real Estate Association, which also scaled back its forecast for price gains and sales for the remainder of the year.
Sales volumes fell by 24.7 per cent on a year-over-year basis, but edged down just one per cent from July to August, making it the smallest of six consecutive month-over-month declines in sales volumes, the group’s data showed.
It was close to an even split between the number of markets in which month-over-month sales were up and those in which sales were down. Gains were led by the Greater Toronto Area (GTA) and a large regional mix of other Ontario markets. These were offset by declines in Greater Vancouver, Calgary, Edmonton, Winnipeg and Halifax-Dartmouth.

Despite the decline from last August, the actual national average price, which is heavily influenced by sales in Greater Vancouver and the GTA, inched up $7,702 over July.

While a nearly two per cent gain might be seen as encouraging by some, TD economist Rishi Sondhi wrote in a note to clients that it was mostly fuelled by a strong month in Toronto, where “it would be tough to argue that conditions have reached a turning point.”
“For instance, sales are still 30 per cent below pre-pandemic levels in Toronto, supply/demand balances continue to favour buyers, and benchmark prices declined at a hefty two per cent monthly rate,” Sondhi wrote.
Bank of Montreal economist Robert Kavcic said there appeared to be a window where some buyers could take advantage.
“Sales stabilized especially in the GTA and Ontario. They’re still at very low levels, ones that you would typically see during a recession or at least a downturn. So, I don’t think buyers are coming back in mass,” Kavcic said in an interview.

“I think, because some buyers have seen house prices come down 10 or 20 per cent where they’re looking and some buyers are still holding mortgage rate pre-approvals from a couple of months ago, before the Bank of Canada really cranked up interest rates. So they have a pretty good window right now to actually buy something.”
Jill Oudil, chair of CREA, said that she believes that overall, buyers are still reluctant, despite some of the recent drops.
“August saw national sales hold steady month-to-month for the first time since February which, along with a stabilization of demand/supply conditions in many markets, could be an early sign that this year’s sharp adjustment in housing markets across Canada may have mostly run its course,” Oudil said in the report. “Some buyers may choose to remain on the sidelines until they see clearer signs of borrowing costs and prices also stabilizing.”

Meanwhile, the Aggregate Composite MLS Home Price Index (HPI) edged down 1.6 per cent on a month-over-month basis in August, not a small decline historically, but smaller than those in June and July. The HPI was still up by 7.1 per cent on a year-over-year basis in August. This was the first single-digit increase in almost two years, as year-over-year comparisons have been winding down at a brisk pace from the near-30-per-cent year-over-year gains logged just six months ago.
“The bigger picture is that there is still an enormous interest rate shock to absorb,” Kavcic said. He thinks that the price correction is going to be a slow, drawn-out process because there isn’t any forced selling in the market.
“At the same time, if sellers do want to move a unit, buyers just simply can’t qualify for and pay as much as they did six months ago. So if units are going to trade, they’re going to have to be done at lower prices.” Kavcic said.

CREA also released a report Thursday updating their previous projections of the resale housing market. The updated report forecasts that the national average home price will rise by 4.7 per cent to $720,255 by the end of 2022, down $42,131 from the $762,386 target it set in June .
Some 532,545 properties are forecasted to trade hands via Canadian MLS Systems in 2022 — a decline of 20 per cent from the 2021 annual record and fewer than the 568,288 projected in June. The downward revision was mainly the result of reduced activity in Ontario, along with smaller revisions in B.C., Alberta, and Quebec.
The group also scaled back its forecast for sales into 2023, when it now predicts 520,156 units will change hands, down from 552,403 projected in June.

© 2022 Vancouver Sun

Rate hikes hurt consumers the most, analysts say

Ephraim Vecina
other

Homeowners are at risk of further rate increases down the line

The latest Bank of Canada rate hike represents a huge strain on consumers, financial industry players have warned.

“Another 75 bps sucks significant discretionary income from the pockets of floating-rate borrowers,” analyst Robert McLister told the Financial Post. “It also boosts the minimum mortgage stress test rate, which will dim housing sentiment further.”

James Laird, co-CEO of Ratehub.ca and president of CanWise, said that homeowners should brace for further increases down the line.

“Fixed-rate mortgage holders should budget for today’s higher rates when their next renewal comes up,” Laird said.

Read more: Bank of Canada “not done” on rate hikes: CIBC’s Tal

Christopher Alexander, president of RE/MAX Canada, said that much of the consumer’s burden is during the qualification process.

“Asking people to qualify at 7% now is going to negatively affect more people than even the government, I would think, wants to,” Alexander said. “I’m all for responsible lending practices – that’s what got us through the financial crisis in 2008 – but the stress test is just putting too many people at a disadvantage considering how high interest rates are today.”

 

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New database shows rental housing completions in B.C. varies by municipality

Joanne Lee Young
The Vancouver Sun

Website lets voters compare need against completed units in their municipality

 Over the past seven years, Pitt Meadows and West Vancouver built the fewest rental units per capita of all municipalities in Metro Vancouver, while the City of North Vancouver added the most.

This is the kind of information that can be pulled from a new website that lets voters  compare what housing is needed with what has been approved and constructed in 160 municipalities across B.C.

“The most striking thing is that not a single municipality has been able to experience completions that come close to the need and the demand that’s out there. For me, that’s the real story of the data,” said Thom Armstrong, CEO of the Co-op Housing Federation of B.C., which joined the B.C. Non-Profit Housing Association and the Aboriginal Housing Management Association to create the website.

The groups hope information from the database will spur candidates for the municipal elections in October to sign a five-point pledge to streamline the process to build non-profit, Indigenous and co-op housing by cutting red tape and prioritizing land-use decisions as well as protect the existing supply.

The site allows users to search data from Statistics Canada and the Canada Mortgage and Housing Corporation, as well as each municipality’s own housing needs assessment. Users can compare information such as the percentage of homeowners versus renters and the number of units delivered, from market to affordable.

For instance, from 2015 to 2021, Pitt Meadows added 13 market-rental units, West Vancouver 68, and Richmond 1,008, putting them at the bottom of the list for total number of such units completed compared to the population.

The City of North Vancouver added 1,768 market-rental units, New Westminster 1,854 and Vancouver 12,750, placing them among the top three for total number of such units completed compared to the population.

But these numbers still fall short of what’s needed, observers say.

“A really significant focus of council’s time (in West Vancouver) has been looking at housing supply for workers, particularly renters, and what they’ve built in the last seven years is certainly not sufficient to tackle their workforce housing crisis,” said Jill Atkey, CEO of the B.C. Non-Profit Housing Association.

On Vancouver Island, the need for affordable housing has also been a focus of council’s attention in Duncan, where there is a homelessness crisis. Currently, 45 per cent of the population rents, while 55 per cent owns. However, over the past seven years, only one unit of market rental housing has been built.

“It’s hard from the data to understand exactly what the challenges are, but when so much of the public conversation is around housing affordability, it’s going to be surprising for residents in that community to learn how little rental development is being built,” said Atkey.

Since 2019, municipalities by law have had to complete housing needs assessments and update them every five years.

Atkey said the province is trying to determine if sufficient data is being gathered. Communities look at population growth to make projections for new homes, but this approach doesn’t allow for seeing “baked-in chronic undersupply,” she said.

She also asked if updates every five years make sense in such a dynamic housing market.

Gary Wilson, president and chair for the Aboriginal Housing Management Association, added that what the current data may not easily show is the correlation between the Indigenous populations and homelessness in those communities.

There are many communities with Indigenous overrepresentation in the population of those experiencing homelessness, but two-thirds of all municipalities don’t include data in their assessments needed for tackling the needs of urban Indigenous population, he said.

For example, in Parksville, 29 per cent of the respondents in a 2020 homeless count identified as Indigenous while Indigenous people made up just three per cent of the community’s population in the 2016 census. In Duncan, 34 per cent of the respondents in a 2020 homeless count identified as Indigenous, while Indigenous people made up 13 per cent of the community population.

Most communities only included partial data, without the kind of information that would allow for setting targets such as how many units need to be built or by when. Only Surrey, Kamloops, Powell River and Fort St. John tried to quantify the number of homes that would be needed for their urban, Indigenous populations.

“It’s a missed opportunity,” said Armstrong. “Neither the province or the vast majority of municipalities thought it was worth applying an Indigenous housing lens to housing need surveys. A land acknowledgement at the beginning of council meetings is not a housing strategy.”

 

© 2022 Vancouver Sun