This weeks top stories include how job growth in Canada last month was mainly attributed to Ontario, how the Greater Toronto Area condo market has taken a nose dive, how Dundee Capital Markets purchased Sotheby’s International Real Estate and is taking the plunge into the residential real estate sector, how the U.S. housing recovery remains fragile but shows positive signs, how real estate in Alberta topped out Toronto, how bidding wars have emerged in Toronto’s rental market and how the housing market will affect GDP and create slow growth for the Canadian economy next year.
According to Statistics Canada’s latest report, the Canadian labour market came to a standstill in the month of October while our counterparts south of the border showed signs of strength by adding more jobs then expected. The jobless rate in Canada remained at 7.4% only adding 1800 jobs last month.
Doug Porter, deputy chief economist at BMO Capital Markets in Toronto commented, “That’s good news for Canada. We are seeing some real improvement in the U.S. labour market. With our consumers largely tapped out, no room for housing to grow and the government sector restraining spending these days, exports are probably our biggest hope, and we can only get strong export growth if the U.S. economy picks up steam. This report suggests it is indeed picking up steam.”
This is great news for Ontario, which is the province in Canada most closely tied to the U.S. market than any other province. The report points to further caution to the near term economic outlook with other sectors, such as housing and GDP contraction, continuing to take a beating. The tourism sector is also down with the strong Canadian dollar holding down the sector. We continue to have job growth but not enough to create a dent in the unemployment rate. What do you think? Please comment below.
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Toronto continues to see two very different housing markets with high rise condo’s losing demand and single family homes having an uptick in demand. Condo’s are continuing to see a decline in value and demand while single family homes continue to see an increase in pricing and demand.
With ten solid years of demand and price growth, the Greater Toronto Area (GTA) market is coming to a stop and is not expected to show any signs of recovery until at least the second half of next year, according to a market outlook report from the Canada Housing and Mortgage Corporation (CMHC). Sales on the Multiple Listing Service (MLS) network had declined 15.6% in the GTA last month when compared to October of last year. Even with the sales slump, the overall strength of the housing market has helped keep the numbers down in the condo market that has been losing demand.
Realtor Brad Lamb commented, “I believe the slowdown we’re seeing has largely been caused by the tightening of mortgage financing rules and is a short-term shock which is basically going to take some people out of the market for a year until they can save up a bigger down payment. The single family home market is another thing. There’s not a lot of new supply coming there (unlike the GTA condo market where about 50,000 new units are under construction), so prices will continue to rise.” Tighter mortgage rules and a decline in new home and condo construction will continue to cool the market well into 2013.
Experts feel that this is what’s needed to bring building and home prices back to more affordable levels. The 905 region is witnessing it’s own housing issues with condo sales declining 20% but seeing a 4% increase in the average price to $286,138. Bidding wars are beginning to slow and this could very well see the end of bidding wars for a very long time. Coldwell Banker realtor Claude Boiron commented, “Sellers have been conditioned to think they are going to make a killing, but the playing field is being leveled.” Brad Lamb agrees and stated that he just abandoned plans for three developments and stated “I have absolutely no plans to build anything in Toronto for quite a while.” What do you think? Please comment below.
Dundee Capital Markets Inc. feels that the Canadian housing market is not in as much turmoil as the media is currently reporting. Ned Goodman, chief executive of Dundee Capital Markets Inc., has decided to take on the residential housing sector in Canada by acquiring Sotheby’s International Realty Canada through one of his companies.
Mr. Goodman’s 360 VOX Corp. has entered into an agreement to purchase a group of real estate businesses currently known as Sotheby’s International Realty Quebec, Blueprint Global Marketing, and Sotheby’s International Realty Canada. The group actively lists, markets and sells real estate. It also has its hands in condo developments, attached and detached homes as well as resort properties. Blueprint Global Marketing works directly with Sotheby’s to list and sell international developments.
Mr. Goodman, who currently has interests in commercial real estate around the world, helped nurture the deal to take his first plunge into the residential market sector. The high end brand is expected to be a good fit for Dundee Wealth, which is the firm’s Toronto based wealth management arm. The deal worked out to $3.65 million in cash and 54.25 million common shares of 360 VOX. The completion of the transaction is set to take place as early as the end of this month. What do you think this says about the residential sector in Canada? Please comment below.
The U.S. housing recovery is still on a tightrope and requires the government to reduce its role in the mortgage financing process according to Robert Shiller, a professor at Yale University. Robert Shiller is also known as the co-creator of the S&P Case-Shiller index of property values.
Shiller commented, “There are positive signs, the problem is that it’s not a really strong positive sign yet. It is not a resounding recovery.” September witnessed Americans purchasing homes at the fastest pace in two years. This could be an indication that the housing market is starting to recoup its losses as sales rose 5.7% to a 389,000 annual pace. This is the largest increase since April of 2010, following a revised 368,000 rate for the month of August according to the Commerce Department.
Shiller commented further by stating, “We have to get back to a private-sector mortgage market, without government dominance. We have to think about alternative mortgages that don’t invite the same sort of crisis where we have 10 million homeowners under water. We don’t want to put Americans in such leveraged positions.” Shiller also commented that the U.S. economy requires further fiscal stimulus to create jobs and bring down the 7.9% unemployment rate in the U.S. He also feels that increases in spending should be offset with higher taxes on the wealthy. What do you think? Please comment below.
The top Canadian cities for real estate investment are no longer in Ontario and are not Toronto, Montreal or Vancouver. According to a new report from PwC and the Urban Land Institute, Calgary and Edmonton are now considered the top cities for real estate investment. Investors are now expected to lean more towards investing in apartment and office buildings next year with developers expected to focus on the retail market.
The report outlines the opinions of over 900 individuals throughout Canada, the U.S. and Latin America where most feel that compared to other countries, Canada will continue to perform. Lori-Ann Beausoleil, PwC Canada’s real estate leader commented, “The Canadian real estate community understands real estate fundamentals and knows how to react to fluctuations in monetary policy and capital markets. Canada’s real estate industry continues to operate well despite uncertainties in domestic and global economies.” What do you think? Please comment below.
Toronto has continued to witness multiple offers and bidding wars but it is not in the slowing housing market but rather in the rental market. Vacancy rates in Toronto are now roughly 1.4%, which is down 2.1% from 2009 when vacancy rates were 3.5%. Consumer demand for rental property condo’s with stainless steel and granite has become overwhelming.
It seems that the condo boom has created the illusion of extensive supply but most developments are still under construction and supply is expected to meet demand for rentals within the next three to five years. Olenka Mallon of Re/Max advises clients to come prepared with a letter of employment, references from previous landlords and above all, a good credit score. Oloenka commented, “I tell all my clients, ‘Don’t even start looking until you have all your paperwork in order. People who make good money but don’t have a great credit record get really upset about this. I only take on AAA clients now. That’s how tight the rental market is.”
Competition is fierce along the Bay Street corridor where students and professionals fight for spaces and are willing to go without cars just to be able to afford the space. It seems that the rental condo market is undergoing a professionalization when almost no new rental buildings are being developed, which has condo owners in an advantageous position of being able to set the price and pick who they will take as a tenant. This has lead to an increase in rent of 20% over the last two years. What do you think of the increase in rents? Please comment below.
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October witnessed the fall of housing starts in Canada in the both the single and multiple urban starts sector, according to the latest release from Canada Mortgage and Housing Corporation (CMHC) yesterday. The report went on to state that there will be further slowing in the country’s housing market.
The seasonally adjusted annualized rate of housing starts reached 204,107 units in the month of October and was down 19,888 units from Septembers starts. After Septembers figures were revised upwards from the previous starts of 220,215 units. The housing starts decrease was attributed to a decrease in multiple and single starts in Quebec and in the Prairies. Mathieu Laberge, CMHC deputy chief economist stated, “Multiple starts also declined in many urban centers in Ontario, more than offsetting an increase in such starts in Toronto.”
Analysts previously expected housing starts to reach 211,500 starts but were extremely disappointed to see the actual numbers. BMO Capital Markets economist Robert Kavcic tuned in by commenting, “Residential construction likely cut into Canadian real GDP growth for a second-straight quarter in Q3, and October’s result points to further weakening in Q4. With sales trends running softer and starts expected to fade further, the sector will likely remain a drag on growth through much of 2013, a stark shift from recent years.”
The negative housing starts news is being offset with home price increases in the month of September as home prices rose for the 18th consecutive month by 0.2% with Toronto leading the way for the increase. Prices for new homes in the Toronto/Oshawa region, which accounts for 26.6% of the entire Canadian market, were up 0.6% from the month of August. What do you think of this news? Please comment below.
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