Carbon emissions have been described as ‘the blind spot’ of the building industry | Paul Morris

June 23rd, 2022

Douglas Todd: The hidden climate costs of B.C.’s burgeoning highrises, Part II

Douglas Todd
The Vancouver Sun

Opinion: One study showed a neighbourhood of highrise towers would create 142 per cent more carbon emissions than a Paris-like lower-rise region with the same population.

 Highrises create more carbon emissions than lowrises in part because “to build tall you need heavier structures, chunkier concrete foundations,” says Francesco Pomponi, of Edinburgh Napier University, who has produced an original study on the subject. Pictured here, Singapor construction with a backdrop of highrises. Photo by ROSLAN RAHMAN /AFP/Getty Images

Second in a series. Go here for part one.

 

While politicians claim they’re reducing the harmful daily pollutants caused by glass and steel highrises, that’s not the end of the climate worry.

Research reveals highrises come with elevated “embodied” costs, which refer to the amount of greenhouse gases they emit in their entire lifetime. That begins with the construction process.

It’s often ignored during environmental assessments. But when the massive concrete foundations of highrises are taken into account, their contribution to global warming skyrockets.

“’Embodied’ carbon emissions have been described as ‘the blind spot’ of the building industry,” says Vancouver sustainability specialist Paul Morris. “We need to consider embodied emissions from extraction, transportation, manufacture and construction. Concrete is the worst material for embodied emissions.”

In a groundbreaking study, Francesco Pomponi, of Edinburgh Napier University, has produced original environmental models that support the building of cities in which more people live closer together — but mostly in buildings of 10 storeys and under.

Given the carbon-intense materials needed to construct tall buildings, Pomponi’s team concluded that a neighbourhood of highrise towers would create 142 per cent more carbon emissions than a Paris-like lower-rise region with the same population. 

 

A neighbourhood of highrise towers would create 142 per cent more carbon emissions than a Paris-like lower-rise region — pictured here — with the same population. Photo by JACQUES DEMARTHON /AFP/Getty Images

“Our findings show that high-density, low-rise cities, such as Paris, are more environmentally friendly than high-density, highrise cities, such as New York,” says Pomponi, lead author of the 2021 study in NPJ Urban Sustainability.

 

To put it another way, Pomponi found that, over a building’s projected lifetime of 60 years, dense, low-rise apartments produce 365 tons of carbon dioxide less per person than their skyscraper alternative.

One reason for that, Pomponi said, is “to build tall you need heavier structures, chunkier foundations.”

While Pomponi recognizes highrises can house more people than low-rises on the same footprint, that doesn’t take into account “you cannot put two highrise buildings as close as you can two low-rising buildings … For a lot of good reasons like privacy, ventilation and daylighting, highrise buildings need to be further apart.”

Even though more low-rise buildings might be needed to match the population capacity of skyscrapers, Pomponi says, despite possible extra land being required, low rises still produce less carbon emissions than building taller. He intends further studies on how the highrise-low-rise debate relates to transportation emissions.

 

Meanwhile, Pomponi’s work is echoed by a study of 650 buildings led by engineering professors Martin Rock, of Austria, and Marcella Saade, of the University of Sherbrooke in Quebec. They found so-called “energy-efficient” residential buildings emit up to 50 per cent more greenhouse-gas emissions during their lifetime. Much of that is due to the “carbon spike” from construction. The authors, in 2019, wrote, “Profound changes are needed in the production and use of buildings.”

 

Both Burnaby Mayor Mike Hurley and Sean Pander, the city of Vancouver’s manager of Green Buildings, acknowledged the seriousness of “embodied” greenhouse-gas emissions from the construction of concrete-steel-and-glass towers.

“However there are wide variations from the best to the worst,” said Pander, who, along with Hurley, stressed how their respective councils recently committed to further reducing such emissions, including through the use of “greener concrete mixes.”

On May 17, Pander said, Vancouver council voted to make developers cut embodied emissions. “The recommended requirements will come into effect by 2025 and put Vancouver on a path to achieving” a 40 per cent reduction by 2030, he said.

 

 

Gareth Sirotnik laments Vancouver councillors no longer seem to expect developers to make significant contributions to community life, to streetscapes or green spaces. Photo by Francis Georgian /PNG

For her part, Councillor Colleen Hardwick said that while other councillors often talk about “green concrete,” her understanding is it “only reduces emissions by about 15 per cent.”

The studies showing strong emissions from highrises are quite credible, said Hardwick. “It does make me wonder why council has only ever been shown a primarily concrete highrise solution to our housing and affordability needs.”

There is another concern — a third way to weigh the environmental impact of highrises, which focuses on their effects on community and the ecology.

“Green overcrowding.” “Density without amenity.” Those were two of the terms that Wendy Sarkissian, an environmental ethicist, used in her study to describe the arguments of those resisting former Vancouver mayor Sam Sullivan’s campaign to use highrises to create EcoDensity.

 

Sullivan was often accused of “greenwashing” developers’ crusade for more highrises, which are more profitable.

Sarkissian’s concerns are echoed in a recent book by the University of Chicago’s Kheir Al Kodmany. In a chapter titled Unsustainable Tall Building Developments, the professor of urban design joins planning gurus like Jane Jacobs and Jan Gehl in critiquing towers.

Low-rise neighbourhoods “emphasize the value of human scale and provide abundant opportunity for healthy social interaction,” Kodmany writes. “Therefore, in any urban area, no matter how dense, keep the buildings four storeys high or less.”

Kodmany also found tall buildings packed together create an “urban heat island effect … Dark surfaces that absorb heat from the sun, a lack of greenery, and waste heat and vehicles lead to higher temperatures.”

 

 

City of Vancouver handout renderings of the Broadway plan, which was approved by a majority of council Wednesday night. These drawings have been criticized for under-playing the impact of the scores of new highrises. See below for an alternative modeling of the  Broadway Plan.

Then there are the wind tunnels. “Tall buildings create an adverse effect on the microclimate due to wind funnelling and turbulence around their bases, causing discomfort to pedestrians.”mfort to pedestrians.”

Birds also suffer. “Bird-glass collisions are an unfortunate side-effect of tall building developments throughout the world,” Kodmany says. Billions of birds perish each year from collisions with glass towers.

To enable people to connect and to combat heat islands, SFU sustainability specialist Alex Boston is among those who would like to see more green space included in the sweeping Broadway Plan, which seeks to house at least 50,000 more residents in highrises in a 500-block area of Mount Pleasant, Fairview and Kitsilano. It was approved Wednesday night in a seven-to-four vote.

 

Gareth Sirotnik, who lives a block from the first new highrise approved for the Broadway corridor, laments councillors no longer seem to expect developers to make significant contributions to community life, to streetscapes or green spaces.

“I live on the 14th floor of an 18-storey condo at the crest of Burrard-Granville Slopes I bought new 30 years ago. To gain six floors above the 12-floor guideline limit, my building developer signed away nearly 30 per cent of the property as a permanent public park, which we maintain.”

“The days for such amenities are gone. The city just approved a 39-storey building a block away without  almost any public amenities beyond a grocery store.”

Even in the face of strong environmental concerns, some who argue for the necessity of highrises object that those who seek density via shorter buildings seem to want to turn every city into a version of central Paris, with blocks of repetitive six-storey apartment blocks.

 

However, Pomponi says cities don’t need to become monotonously lowrise. “Each building should not be identical to the next, with a very fixed and prescribed height. It’s more about having an upper threshold that, unless you’ve got a really, really good reason, it should not be exceeded.”

 

Artistic rendering, by Stephen Bohus, of the Broadway Plan. This “massing model” offers an earial view looking east along 7th Avenue, with Vine St. at the bottom. Bohus is a graphic designer with a degree in landscape architecture. He collaborated with architect Brian Palmquist.

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1.51 acres industrial property in Alaska Rd. Sells for $3.85 million

June 23rd, 2022

Fort St. John industrial property sells $1.4M above assessment

Nai Commercial
Western Investor

The 13,000-square-foot building on a 1.5-acre lot was custom built for a single tenant in Fort St. John, B.C.

Property type: Industrial

Location: 8316 Alaska Road, Fort St John, B.C.

Number of units: 1

Size of property: 13,000 square feet

Size of land in acres: 1.51 acres

Zoning: C-4 (Highway commercial)

BC Assessment value: $2.46 million

List price: $4.35 million

Sale price: $3.85 million

Date of sale: June 14, 2022

Brokerages: Buyer’s brokerage: NAI Commercial, Vancouver.  Seller’s brokerage: Re/Max Action Realty Inc., Fort St. John, B.C.

Brokers: Danny Su, NAI Commercial; Kathy Miller, Re/Max Action Realty Inc.

 

© 2022 Western Investor

0.82 acres retail in Burnaby sells for $9.3 million

June 23rd, 2022

Burnaby single-tenant drive-thru sells for $9.3 million

Marcus & Millichap
Western Investor

A&W drive-thru restaurant is on a 36,000-square-foot lot on Kingsway Avenue, Burnaby, B.C., with development potential.

Property type: Retail

Location: 6535 Kingsway Avenue, Burnaby, B.C.

Number of tenants: 1

Size of property: 36,000 square feet

Size of land in acres: 0.82 acres

Sale price: $9.3 million

Brokerage: Marcus & Millichap, Vancouver

Brokers: Jon Buckley, Joe Genest, Andrew Gromley, Curtis Leonhardt.

© 2022 Western Investor

Lower Mainland’s commercial real estate market saw a steady pace of sales in the Q1 2022

June 23rd, 2022

Lower Mainland’s commercial real estate market begins 2022 with steady sales and higher prices

REBGV Staff
REBGV

 Coming off near-record activity in 2021, the Lower Mainland’s commercial real estate market saw a steady pace of sales in the first quarter (Q1) of 2022. 

There were 595 commercial real estate sales in the Lower Mainland in Q1 2022, a one per cent decrease from the 601 sales in Q1 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 $3.718 billion in Q1 2022, a 32.9 per cent increase from $2.798 billion in Q1 2021. 

“Strong economic growth and low interest rates helped keep the Lower Mainland’s commercial real estate market moving briskly in 2021, and this momentum carried into the first quarter of 2022. Raw land was the most popular and expensive commercial category driving activity to begin the year as companies look for space to expand and pursue their commercial ventures in the region. Going forward, we’ll need to see how the rising interest rates and inflationary pressure that we’re experiencing today will impact our commercial real estate market for the balance of 2022.”

Daniel John, REBGV Chair

Q1 2022 activity by category

Land: There were 206 commercial land sales in Q1 2022, which is a 63.5 per cent increase from the 126 land sales in Q1 2021. The dollar value of land sales was $2.085 billion in Q1 2022, a 177.5 per cent increase from $752 million in Q1 2021. 

Office and Retail: There were 219 office and retail sales in the Lower Mainland in Q1 2022, which is down 6.8 per cent from the 235 sales in Q1 2021. The dollar value of office and retail sales was $624 million in Q1 2022, a 29.7 per cent decrease from $887 million in Q1 2021. 

Industrial: There were 141 industrial land sales in the Lower Mainland in Q1 2022, which is a 28.8 per cent decrease from the 198 sales in Q1 2021. The dollar value of industrial sales was $673 million in Q1 2022, a two per cent increase from $660 million in Q1 2021. 

Multi-Family: There were 29 multi-family land sales in the Lower Mainland in Q1 2022, which is down 31 per cent from 42 sales in Q1 2021. The dollar value of multi-family sales was $336 million in Q1 2022, a 32.7 per cent decrease from $499 million in Q1 2021.

 

 

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Grosvenor acquires Oakridge transit centre plans to begin redevelopment in 2025

June 23rd, 2022

Grosvenor acquires Oakridge transit centre site

Peter Mitham
Western Investor

Redevelopment set to begin in 2025 on first of four phases
Grosvenor has acquired the former Oakridge transit centre with plans to begin redevelopment in 2025.Grosvenor
The former Oakridge transit centre site has changed hands in advance of proceeding through the city approvals process.
Grosvenor announced its purchase of the property June 22 from MOMC Canada, which acquired the site from TransLink in 2016 in partnership with Intergulf Development Group. MOMC will retain a minority interest. Transca Real Estate Development (Canada) Ltd., which will partner with Grosvenor on the site’s redevelopment, was also a party to the transaction.
The deal was undertaken with a view to kickstarting development, said Mike Ward, senior vice-president and general manager with Grosvenor in Vancouver.
“It was really about our brand, and bringing that brand to a site that could use it really well,” he said.
Ward said MOMC – also known as Modern Green – is separate from a related company headquartered in China and the Oakridge deal is not linked to the owner’s activities in Asia.
Zhang Lei, chair of Modern Green, also chairs Modern Land (China) Co. Ltd., a company listed on the Hong Kong Stock Exchange. Modern Land’s interim report audited by KPMG identified it as one of China’s top 100 real estate enterprises for seven consecutive years.
But last fall, Modern Land ran into challenges with coupon payments on maturing bonds.
“This is not related to the Chinese business,” Ward said. “This is a personal Vancouver holding of the fellow who is the chairman of both the Vancouver company and the company in China, but they are not legally or financially tied together.”
Grosvenor plans to file a development application with the city in the near future, with the intent of breaking ground on the first phase in partnership with Transca in early 2025.
A master plan approved by the city in 2020 provides for approximately 17 buildings ranging in size from four to 26 storeys with 1,630 residential units, both market and non-market housing. The master plan stipulates that 20 per cent of the residential units be designated for affordable housing, including city-owned social housing to moderate income rental housing.
Retail space and a two-acre park are also part of the development, which will see 1.5 million square feet built on the 13.8-acre site.
“The master plan is complete and approved, but now we have to go through the details design and development permit process for the first phase,” Ward said.
The project will ultimately have four phases. Ward believes the two-year window for securing municipal approvals for the first phase is reasonable. By then, construction costs should have stabilized as well as consumer demand, setting the stage for construction.
This isn’t Grosvenor’s first foray into the area. The company bought a townhouse site at Oak and 37th six months ago, and purchased a development site at 46th and Oak five years ago.
“We’ve had our eye on the area for some time,” Ward said. “We like the area for all the obvious reasons, and the Oakridge Park development – the Westbank-Quadreal project – is going to be transformative. … We’re excited to be near it, so that our future residents can benefit from it and the transit that’s at it to get to the airport, to get to downtown.”
A purchase price for the property was not disclosed.
Ward said the transaction was via a share purchase, which means it will not be registered with land titles.
The property last sold in late 2016, when it was valued at $440 million. Ward would not comment on the premium paid relative to the last sale price.
BC Assessment data pegs the value of the site at less than $400 million.

© 2022 Western Investor

Minimum mortgage stress test rate climb to 7% or higher | John Lusink

June 22nd, 2022

Poll: Most Ontarians sceptical of their homeownership prospects

Ephraim Vecina
other

Rising mortgage rates are a significant factor impeding Canadians’ plans

More than half of Ontarians (57%) indicated a belief that they might never be able to afford a home in their current city or town, according to a new poll by independent brokerage Right at Home Realty.
Approximately 54% of parents in Ontario also said that they are not planning on helping their children buy a home in the future.
“The impact of rising mortgage rates has reduced the buying power of potential homebuyers. Additionally, the minimum mortgage stress test rate will climb to 7% or higher,” said John Lusink, president of Right at Home Realty.
The trend of eroding affordability has essentially forced Ontario homeowners to stay put, with as many as 80% saying that they will not be selling their homes in the next two or three years (versus the 77% share last year).
“Another impact of the rising rates is the financial disincentive created for those thinking of selling but who are now faced with much higher financing costs when considering buying their next home.”
Read more: Canada housing market and interest rates – what’s the impact?
Lusink stressed that “while we will continue to see a drop in market activity, we do not anticipate this will lead to a market crash.”
Still, only 19% of potential first-time home buyers in Ontario are intending to buy in the next two to three years, compared to 30% in 2021. Another 32% said that the pandemic has negatively impacted their ability to save for residential down payments, compared to 23% in 2021.
An estimated 23% of current home owners in Ontario who are planning to sell their homes are doing so to take advantage of the current market, more than doubling from the 11% share in 2021.

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240,000-square-foot distribution centre in Richmond expected to open in spring 2024

June 22nd, 2022

Coca-Cola Bottling to open $18 million distribution hub in Richmond

Glen Korstrom
Western Investor

Coca-Cola Canada Bottling Ltd.’s new B.C. investments also includes a $24 million bottling line
New 240,000-square-foot distribution centre at 8040 Zylmans Way, Richmond is expected to open spring 2024. | Submitted
Coca-Cola Canada Bottling Ltd. is investing heavily in British Columbia as it aims to strengthen its supply chains.
Of approximately $100 million that the company is investing across Canada, $42 million is set to be injected into two sites in Richmond, the company’s CEO, Todd Parsons, told Business in Vancouver.
That includes $24 million for a new bottling line at the company’s 2471 Viking Way bottling plant, and $18 million to create a new 240,000-square-foot distribution centre at 8040 Zylmans Way that would be expected to open in spring 2024.
Coca-Cola Canada Bottling already operates a 120,000-square-foot distribution centre in Richmond, and an 80,000-square-foot distribution centre in Coquitlam, Parsons said. He added that those facilities will continue to operate for the next couple years, until their leases expire. 
Global beverage giant Coca-Cola Co. in 2018 sold Coca-Cola Canada Bottling for an undisclosed amount to Maple Leaf Sports & Entertainment principal Larry Tanenbaum and entrepreneurial whiz Junior Bridgeman, who may be best known as a former National Basketball Association player.
Of Coca-Cola Canada Bottling’s 5,700 employees, 770 are based in B.C., with 550 in the Lower Mainland, Parsons said. Those employees make Coca-Cola, and other beverages, such as Canada Dry and A&W Root Beer, from concentrates that the Coca-Cola Co. sells to the bottling venture. Those employees also distribute those beverages to approximately 5,000 B.C. retailers in the company’s fleet of 49 iconic Coca-Cola-branded trucks. Unlike competitor PepsiCo Inc. (Nasdaq:PEP), Coca-Cola Co. does not produce snacks, Parsons explained. Coca-Cola Canada Bottling’s Richmond manufacturing plant currently operates 24 hours per day for five days a week. That’s down from non-stop production during the peak of the COVID-19 pandemic, Parsons said. During that time, in-home Coca-Cola consumption soared. 
The new bottling line will increase capacity to the point where operating hours might decrease, he said. The company expects sales to increase by about three per cent per year but Parsons could not say exactly how much volume he expects to produce once the new line is operational in spring 2023.
Parsons estimated that the current Richmond manufacturing plant produces the equivalent of about 480 million 355-millilitre cans per year.
Various sizes of polyethylene bottles are also filled, with the current bottling line requiring those bottles to be previously manufactured.
“Today, full-size bottles have to be manufactured somewhere else, shipped on a truck and delivered to the facility and then fed into the production line,” Parsons said. “The new line can do a complete production from a pre-form.”
By that he explained that the new line can take test-tube-sized polyethylene moulds and blow them into needed bottle sizes, fill the bottles and then label them.
With that technological advance, Coca-Cola Canada Bottling is able to rely on one truckload of pre-formed polyethylene moulds instead of what was previously 10 truckloads of ready-made polyethylene bottles. “This reduces the carbon footprint dramatically,” he said.

© 2022 Western Investor

Canada inflation rate hits 7.7% in May

June 22nd, 2022

Canadian inflation hits 39-year high

Fergal McAlinden
other

Surges in price growth show no signs of slowing down
Canadian inflation hit a new landmark high in May, accelerating at a yearly pace of 7.7% and reaching its highest rate since 1983, according to Statistics Canada.
The national statistics agency said the consumer price index (CPI) had risen once again on a month-over-month basis, increasing from 6.8% in April as the recent surge in prices across the board showed little sign of abating.
Gas prices have rocketed by 48% over the same time last year, StatCan said, and posted a 12% increase over April as energy price growth – spurred in large part by Russia’s February invasion of Ukraine – continued to spike.
The agency described price pressures as “broad-based” and said they were “pinching the pocketbooks of Canadians and in some cases affecting their ability to meet day-to-day expenses.”
Read next: Canada house prices – StatCan reports the latest
Food prices also swelled on a year-over-year basis, rising by nearly 10% over May last year, while the cost of edible fats and oils increased by an eye-watering 30%.
Overall, the figures signal higher yearly price growth than many economists had anticipated, and will place further attention on the Bank of Canada’s plans to hike its benchmark rate to combat inflation.
The Bank has raised that trendsetting interest rate three times so far this year – first by a quarter point, and then in two 50-basis-point increases – and is widely expected to announce a further hike in its next statement, scheduled for mid-July.
Speculation is growing that the central bank could introduce an oversized three-quarter-point increase following that policy meeting, with the US’s Federal Reserve having hiked its own benchmark rate by that amount last week.

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April’s federal budget contained a flurry of measures aimed at tackling Canada’s housing crisis

June 21st, 2022

Wealth vs. affordability: Time for a frank discussion on Canada’s housing market?

Fergal McAlinden
other

A recalibration of the country’s aims for the market could be required, argues founder

For would-be homebuyers who have found themselves priced out of the housing market of late, a recent National Bank report confirmed the grim reality facing them and countless others in Canada.

That release said Canada witnessed its worst decline for housing affordability in 27 years in Q1 2022 – plummeting for a fifth consecutive quarter – when calculating the mortgage payment as a percentage of income.

The news comes as little surprise, with skyrocketing home prices and frenzied bidding wars putting a home purchase out of reach of scores of Canadians during the red-hot market of recent years.

It’s a crisis that’s been acknowledged by the nation’s policymakers: April’s federal budget contained a flurry of measures aimed at tackling Canada’s housing crisis, injecting supply into the market, and easing some of the challenges facing first-time buyers.

Still, amid a rake of new announcements on housing policy, a comment delivered by finance minister Chrystia Freeland at a Press conference that day was viewed by some housing market observers as the most significant takeaway.

Freeland told reporters in Montreal that she viewed housing affordability as an “intergenerational injustice” that must be rectified, noting the significant obstacles that faced many prospective buyers.

“We had a better shot at buying a home and starting a family than young people today,” she said, “and we cannot have a Canada where the rising generation is shut out of the dream of homeownership.”

Read more: Canada housing affordability is at its worst in a generation – National Bank

That was an important moment – but a wider national conversation on wealth and the housing market is required if Canada is truly to tackle its affordability crisis, according to the founder of Generation Squeeze, a prominent non-profit organization advocating on behalf of young adults.

Dr Paul Kershaw (pictured top) told Canadian Mortgage Professional that a “cultural and political addiction” to high and rising house prices had emerged because of the wealth-building opportunities they presented for those who had already purchased a home, making it even more difficult for others to enter the market.

“While housing affordability is worse than it’s been in decades, the ability of the housing system to produce wealth for homeowners has never been better,” he said.

“I really think that seeing the flipside of the same coin is fundamentally critical to our understanding why, so far, we’ve been slow to discourage the relentless increase in home prices relative to local earnings – and that’s because a majority of Canadians are homeowners.”

In the interests of full disclosure, Kershaw counts himself among that homeowning cohort of Canadians. However, a recalibration of the country’s view of the housing system could be required given the current imbalance that exists between those who own a home and those who don’t, he said. “It’s working badly if affordability is our goal, but it’s working fabulously if producing wealth for homeowners is our goal.”

Despite home values having posted eyewatering year-over-year increases for decades, Canada’s consumer price index (CPI) does not factor house prices into its measures of inflation – meaning that the wrong signals are being given to the Bank of Canada on whether to tighten or loosen monetary policy, according to Kershaw.

Read more: Cool heads required on housing market, says broker-owner

With CPI inflation having surged in recent months, the country’s central bank has responded by jacking up interest rates – and Kershaw argued that factoring home prices into the CPI years ago could have played an important role in preventing some of the affordability struggles currently facing many Canadians in the housing market.

“We have seen very aggressive increases in interest rates – and guess what’s happened? There’s pressure on home prices,” he said. “If only we had that signal set years ago, we wouldn’t have such collateral damage about people being able to borrow cheap credit.

“What do Canadians do? We invest in housing. That pushes up the price. StatCan [Statistics Canada] doesn’t pick that up as a measure of inflation. That sends the wrong signal – ‘no problem here!’ And it keeps [inflation] low,” he said. “And then you have people with more and more cheap credit.”

While that has fuelled wealth windfalls for those who were able to secure a home, it’s also increasingly made homeownership a distant prospect for many Canadians. Freeland’s comments on Budget Day were a vital first step in acknowledging the depth of the problem – and now is the right time to get an important conversation underway, according to Kershaw.

“There’s a moment and a cultural shift right now that I think could be really productive for us finding a better pathway to restoring affordability,” he said, “because we’re going to start to really question: What is our goal for the housing system?”

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Prices continued to trend upward thanks to higher building costs

June 21st, 2022

New home prices rise in May as resale market reports signs of cooling

Michelle McNally
Livabl

While Canada’s resale home market indicated a cooldown in May, new construction property prices continued to trend upward thanks to higher building costs.

In its recently-released New Housing Price Index (NHPI) report for May, Statistics Canada stated that new home prices across the country increased 0.5 per cent between April and May. This follows a 0.3 per cent hike in prices that occurred the previous month.

The NHPI monitors changes in selling prices for new residential homes over time that are agreed upon between the contractor and the buyer when a purchase contract is signed. The NHPI is applicable to new single-family homes, semi-detached residences and townhomes.

Of the 27 census metropolitan areas (CMAs) Statistics Canada analysed, 14 CMAs saw their prices jump on a monthly basis in May while prices in the other half of the CMAs stayed unchanged. Compared to 2021, new home prices in Canada grew 8.4 per cent year-over-year in May, the smallest increase since March 2021.

By comparison, it appeared to be a different story for Canada’s resale market in May as both prices and sales fell.

The Bank of Canada hiked its policy interest rate in April and May, a decision that caused “potential buyers to face higher mortgage rates,” the report said. After these rate increases, the Canadian Real Estate Association (CREA) reported that the country’s resale segment “showed signs of cooling,” as monthly home sales tumbled 8.6 per cent between April and May. Similarly, the benchmark price for resale homes dropped 0.8 per cent monthly.

“In May, rising construction costs continued to push new home prices up,” stated the NHPI report. “However, the increasing mortgage rates seem to have had a larger impact on the resale market than on the new build market, reducing demand and prices of resale properties.”

Growing construction costs support new home price growth

Higher costs for building materials continues to be a main factor behind rising new home prices.

Lumber and other wood product prices reported a 19.3 per cent yearly decline, but Statistics Canada noted that this was “not enough to offset the rising costs of other building materials in May.”

Compared to May 2021, prices for energy and petroleum products were up 78.5 per cent, as were fabricated metal products and construction materials (23.2 per cent), cement, glass, and other non-metallic mineral products (8.7 per cent).

New Halifax homes report strong price increases

Out of the 27 CMAs, Halifax experienced the highest monthly increase in prices, rising 2.4 per cent in May. This marks the biggest jump in new home prices since February 2021.

Part of this may be related to changes in Halifax’s population. Nova Scotia experienced a net increase of 4,487 people in its population during Q4-2021, comprising 2,430 international migrants and 2,057 interprovincial migrants. CREA reported that sales activity was up in Halifax during May. Meanwhile, the MLS Home Price Index benchmark price for a single-family Halifax home was $541,900 during the same month, significantly lower than the national composite of $822,900.

“Increases to net migration and the relative affordability of home prices in the region compared to the rest of Canada may have contributed to the high housing demand amid a tight supply,” explained the NHPI report. “Additionally, bidding wars which started last year were still ongoing in Halifax, applying upward pressure to home prices as buyers tried to secure a home.”

Following Halifax, St. Catharines–Niagara and Windsor recorded the second-highest monthly growth in new home prices, which were up 1.7 per cent in both cities during May,

On an annual basis, Calgary reported the greatest year-over-year increase in new home prices, which were up 18.9 per cent during May. Winnipeg and Kitchener–Cambridge–Waterloo also reported strong year-over-year price growth, at 17 per cent and 14.2 per cent during the same month.

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