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Toronto's new home market sours
Fourth quarter sales were down 58%
New home sales in the Greater Toronto Area ended the year on a decidedly sour note, Leith Moore, Chair of the Building Industry & Land Development Association (BILD), said yesterday in releasing the final statistics, compiled by RealNet Canada Inc., for 2008.
Total new home sales for 2008 came in at 27,947 units, split 55 per cent high-rise (condo suites and lofts), 45 per cent low-rise (single- and semi-detached, town-homes).
"The good news is that we recorded nearly 28,000 new homes sales in 2008. That's a solid base of pending housing starts which should keep trades and suppliers relatively busy in 2009," said Moore.
"The bad news is that sales were down 38 per cent (16,750 units) last year compared with 2007. Worse yet, fourth quarter sales were down 58 per cent while December sales came in at a paltry 451 units, down 77 per cent from December, 2007. This trend-line does not bode well for housing jobs and related spin-off benefits," Moore stated.
Moore noted that while homebuyers understand that home-buying is a safe long-term investment and that factor's such as interest rates and prices are solidly in their favour, they are being held back by uncertainty with respect to the overall economy.
"The pending federal budget is key to instilling confidence in the minds of skittish homebuyers," said Moore, adding that while fiscal stimulus is needed, government at all levels must also look at cutting the cost of doing business and reducing red tape.
"Now is not the time to be increasing costs such as development charges or any of the myriad taxes, fees and levies paid by the industry," Moore asserted, citing the recent provincial musings about harmonizing the GST and PST as an example.
January 27, 2009 | Permalink | Comments (2) | TrackBack
Toronto Real Estate Board reports:
Almost 12,000,000 Square Feet Leased In 2008
With 1,184,614 of square feet of space transacted in December, the TorontoMLS system saw a grand total of 11,961,934 square feet of space leased during the whole of 2008, Commercial Council Chair Garry Lander announced yesterday.
This is down eight per cent from the 13,000,883 figure recorded in 2007. "This result demonstrates that the commercial market has not escaped the downward economic pressures of the last several quarters. Nevertheless, it still compares favorably (up three per cent) with the 11,561,720 figure recorded in 2006."
Lease rates for Industrial properties (all size categories) rose marginally in December, to $5.40 sfn from December 2007's $5.38 sfn. Commercial properties leased for an average of $14.63 sfn, up 12% over last year's figure of $13.11 sfn.
Sales Market Highlights
TREB Members reported 32 Commercial/Industrial Sales in December. Of these, 18 were of Industrial properties in all size categories, which averaged $97.65 per square foot. This compares to a figure of $62.11 derived from non-MLS sources.
January 21, 2009 in Toronto Real Estate Update | Permalink | Comments (4) | TrackBack
January home sales down 50%
Mid-Month Toronto Area Housing Resales at 888
Greater Toronto Area Realtors reported 888 sales during the first half of January compared to 1,776 in the first 15 days of 2008. “According to Statistics Canada the economic situation throughout Canada changed noticeably over the past year with job losses in the fourth quarter of 2008. Toronto is not immune to this, the GTA housing market has been impacted,” according to TREB President Maureen O’Neill.
The average GTA price mid-way through January is $332,495 from $367,574 during the same period in 2008. The median GTA price was $301,000 compared to 316,000 last year. “While sales have declined, listings have remained high. GTA home buyers have benefitted from more choice,” explained Ms. O’Neill. “Historically, increased choice in the marketplace has equated to a moderation in price growth.”
In January 2009, stronger declines in sales and prices were experienced in the City of Toronto. “Sales for January a year ago may have been elevated by the flurry of transactions completed before the city’s land transfer tax went into effect,” added Ms. O’Neill.
“The costs of home ownership in the 416 has increased due to the added land transfer tax many home buyers now face in the City of Toronto. Some households considering the purchase of a home in the City have either put their decision on hold or looked elsewhere in the GTA.”
See Toronto Real Estate Board press release »
Sales in the city off 54% and the average price down 12%.
There is no question this will be a difficult year for the housing market as well as the commercial real estate market.
Job losses for the GTA could mount to 125,000 over the next 12 to 18 months, according to a report by housing analyst Will Dunning.
"We are probably at the edge of a rapid drop in employment," Dunning said. "That added negative factor will accelerate, deepen and prolong the recession."
Dunning said he remains convinced the condo market is the most vulnerable to a downturn, with 36,700 units currently under construction in the GTA. In central Toronto, resale listings, as well as rental condo listings, are up 75 per cent from a year ago, he said.
"I've been saying for a long time that there is excess investment in the condo apartment market and the reckoning has been deferred due to delayed completions," Dunning said. "This has allowed the supply pipeline to get very fat. The reckoning has now begun."
January 20, 2009 in Toronto Real Estate Update | Permalink | Comments (4) | TrackBack
Sell low ... buy lower
Home resales in Toronto took a 45% dive in December, 2008, compared with the same month a year earlier and figures from the Toronto Real Estate Board also show that the average price of a property selling in December was $361,415, down from $394,931 a year earlier.
"The figures have all essentially been telling us the same thing for a while," says Adrienne Warren, economist and real estate market specialist at Scotiabank. "The market is cooling off but I think in most areas it's a fairly orderly cooling off. The cyclical end of a housing boom and just a gradual cooling off in the Canadian economy."
"The city has seen significantly lower pace of sales; mind you, that's on the back of a 2007, which was a phenomenal year for sales," says Pascal Gauthier, economist at TD Economics. "A lot of sales got brought forward into 2007 because of the land transfer tax. That created a bit of a distortion ... when we look at the figures, for example, for the fourth quarter ending in December 08."
The end of the boom times should provide some relief for buyers, as property in the GTA becomes more affordable. On the other hand, Mr. Gauthier says it is not all bad news for sellers.
"Sellers are usually on both sides of the transaction ... people selling their home are often buying [another] home," says Mr. Gauthier. "They might see less of an appreciation to an existing asset but they're facing a lower price in purchasing the next one, so usually on net they're not that much worse off."
Prices for resales and new-build are expected to fall further as more new home construction completions come on to the market.
"New listings actually climbed from year-ago levels in December in Toronto," notes Douglas Porter at BMO Capital Markets, Economic Research. "A rather large warning siren for the price outlook."
As well as existing homes coming on to the market, data from the Canada Mortgage and Housing Corp.(CMHC) shows new home starts in December, 2008, in Toronto rose by 27% compared with a year earlier. All the focus was on the condo sector, with 2008 being a record year. According to CMHC, a 137% annual increase in this segment boosted total new home construction figures (of course, much of this construction was the end result of sales that took place a year or two prior to the construction phase). Low-rise housing, such as singles, semis and townhomes all recorded a fall in home starts.
But analysts are eager to point out that while inventories of unsold homes will increase, the rise in levels is manageable.
"Inventories are not at levels that we're particularly concerned about. They are not at the oversupply of empty new housing units that we saw in Toronto in the early 1990s," says Ms. Warren. "We're certainly not at the level we're seeing in some of the most overbuilt U.S. markets, but they're definitely trending a little bit higher."
Slower sales, increased inventories and moderating prices are sure signs the market is cooling.
"The equilibrium or balance in the market certainly has shifted and it's occurred rather swiftly," says Mr. Gauthier. "Some of that is confidence; people tend to list their homes and test the market, while potential buyers tend to sit on the sidelines waiting to see how much further prices will drop - as consumer sentiment has shifted to being rather pessimistic because of the global recession."
Ms. Warren and Mr. Gauthier both agree this housing downturn is cyclical with reduced affordability driving down sales at the same time as the recession is starting to bite.
"Economic recovery will be relatively slow the next couple of years because there are structural challenges in the Canadian economy," says Ms. Warren. "This will be a down year [for housing] and going into 2010 and 2011, you're looking at a number of flat years, bringing affordability back to the market."
January 17, 2009 | Permalink | Comments (3) | TrackBack
Canadian Real Estate Declines
MLS® home sales hit eight-year December (monthly) low.
The number of properties sold via the MLS® systems of real estate boards in Canada edged down further in December 2008 to reach the lowest level for the month since December 2000, according to statistics released by The Canadian Real Estate Association (CREA). Seasonally adjusted residential MLS® sales activity numbered 27,357 units in December 2008, a decline of 1.8% compared to the previous month.
However, seasonally adjusted activity was up in more than half of Canadian housing markets. Activity declines in Montreal, Calgary and Edmonton more than offset a rebound in the number of transactions in Vancouver, resulting in a small monthly decline in national sales activity.
The small month-over-month decline in national MLS® seasonally adjusted sales activity in December followed double digit declines in September (-14.9 per cent) and October (-12.1 per cent). Activity plummeted 22.2 per cent in the fourth quarter of 2008 to 86,879 units, with seasonally adjusted quarterly declines in activity in all provinces. The sharp drop in fourth quarter activity accounted for over half of the decline in transactions since the peak in 2007.
Year-over-year declines in the MLS® average home price were reported in about half of local markets in December. Lower activity and average prices compared to one year ago remain most pronounced in Canada’s more expensive housing markets. This continues to weigh on the national MLS® residential average price.
The national average price of homes sold via the MLS® in December 2008 declined by 11 per cent from where it stood a year ago. The major market price trend was similar to the national trend, down by 9.9 per cent year over year in December 2008.
The price trend is similar but less dramatic for the weighted national MLS® average price, which compensates for changes in provincial sales activity by taking into account provincial proportions of privately owned housing stock. The weighted national MLS® average price dropped 6.2 per cent year-over-year in December 2008, while the weighted major market average price declined 2.9 per cent.
"Moderating home prices in Canada should not be confused with the downturn in the U.S. housing market," says CREA President Calvin Lindberg. "But any local real estate market is not immune to global economic challenges, and that is what we face today. Low prices are not the concern as much as the perception of doom and gloom. Buyers are waiting to see if the real estate market has hit bottom, and that is a very complex thing to try and calculate. Most of us will only be affected by the market correction psychologically, because the majority of Canadians will not buy or sell property in the coming year."
Seasonally adjusted new MLS® residential listings numbered 72,931 units in December, down three per cent from levels recorded in November. New listings are trending lower. In December, they stood 8.1 per cent below the peak reached in May 2008.
Resale housing market balance is represented by sales as a percentage of new listings. The rise in the number of new listings in the first half of last year along with declining sales activity, particularly in the fourth quarter, resulted in an increasingly balanced resale housing market over the course of 2008.
Sales as a percentage of new listings in the fourth quarter of 2008 fell to the lowest level since the mid 1990s. New listings are trending down from the peak reached in the second quarter of 2008. If this trend continues, the balance of supply and demand will stabilize in 2009.
"Average prices will remain under downward pressure during the Canadian economic recession," said CREA Chief Economist Gregory Klump. "Shaky financial market confidence is pulling down business and consumer confidence. The consensus economic forecast predicts the economy will rebound in the second half of 2009, so housing market trends should strengthen next year."
"There has been a fundamental shift in consumer confidence, with job insecurities prevailing in every region of Canada," CREA’s Chief Economist added. "That is unlikely to change until the worst of the recession is behind us."
January 16, 2009 in Canadian Real Estate Market | Permalink | Comments (5) | TrackBack
Montreal Real Estate Market in 2008
The Greater Montreal Real Estate Board (GMREB) reported that the median price of single-family homes in the Montreal Metropolitan Area increased by 6 per cent in 2008 compared to 2007 while, overall, residential sales slowed by 7 per cent. "The Montreal real estate market fared well in 2008 with almost 41,000 sales transactions, 7 per cent less than the previous year, which was the year that broke all records," said Michel Beausejour, FCA, Chief Executive Officer of the GMREB.
"In addition, prices continued to increase in 2008, which bodes well for homeowners and anyone who has a vested interest in Montreal real estate. You just have to look at what's happening elsewhere like Calgary, Vancouver or Toronto, which have seen prices and sales drop dramatically over the last year, to appreciate the strength of the Montreal market," Beausejour said.
All real estate property types registered price increases in 2008. The median price of a single-family home grew by 6 per cent compared to 2007, to reach $227,000. The median price of plexes also grew by 6 per cent, while that of condominiums increased by 3 per cent.
In terms of sales, condominiums were the big winners in 2008 with sales virtually matching those in the record-breaking year of 2007. Sales of single-family homes dropped by 10 per cent and sales of plexes fell by 9 per cent compared to 2007.
Prices Up, Sales Down in December 2008
Sales in the Montreal Metropolitan Area were down 29 per cent in December 2008 compared to December 2007.
Single-family and plex prices continued to grow, increasing by 3 per cent in December 2008 compared to the same period last year, while that of condominiums dropped by 2 per cent.
"Consumer confidence, a key factor in the vibrancy of the real estate market, has obviously been affected recently as a result of the constant bombarding of unsettling news about the world economy. However, Montrealers should be heartened by the overall results for 2008, which was the second most significant year overall for the Montreal real estate market in terms of sales," said Beausejour. "As well, it's interesting to note the results of our annual buyers' and sellers' survey which show that roughly the same number of people intend on buying this year as last year," he said.
On December 31, 2008, the number of active listings on the MLS® system was up 17 per cent compared to the same date last year.
January 13, 2009 in Canadian Real Estate Market | Permalink | Comments (3) | TrackBack
Toronto home sales cut-in-half
Greater Toronto’s real estate market took a beating last year, with far fewer houses being sold for far less by the end of 2008, according to numbers released by the Toronto Real Estate Board. Homeowners in the city of Toronto bore the brunt of the punishment, as houses in the core sold for nearly $40,000 less in December than they did in the same month the previous year.
Jason Mercer, senior manager of market analysis for the Toronto Real Estate Board, said the drop in real estate activity was expected, considering the market base has declined due to job losses and the lack of confidence of prospective buyers in the second half of the year.
“We have definitely have seen a real shift over the last year or so in economic conditions and that fed through from a consumer confidence perspective for sure. You weren’t seeing as many people out there looking at purchasing a home,” Mr. Mercer said in an interview.
The average price paid for a house last year, $387,482, paled in comparison to the $425,842 sellers averaged in December, 2007.
The 905 region was spared some of the pain, seeing average sales dip only about $20,000, from $360,307 in December, 2007, to $341,847 in December, 2008.
The overall number of transactions significantly dropped in December, with only 1,105 people in the city of Toronto selling their homes in December, compared to the 2,302 who cut deals in the last month of 2007. In the 905, 1,472 sales were recorded last month, compared to 2,344 in December, 2007.
While a struggling economy was primarily responsible for the dip, real estate experts also pointed to bloated year-end numbers from 2007, caused by high traffic ahead of Toronto’s impending land transfer tax.
“Sales have been down for the past few months, significantly actually. I think a lot of that had to do with the jitters with respect to the market,” said John Pasalis, founder of the real estate website Realosophy. “The price decline specifically ... has to do with the fact that there was a big spike in October, November and December (of 2007) because of the transfer tax.”
On the whole of last year, 74,552 homes were sold in the Toronto area, still a significant drop from the 93,193 sold in 2007.
New single family home constructions also dipped in 2008, according to another report. But the annual numbers from Canada Mortgage and Housing Corporation showed construction on new homes actually increased overall last year, buoyed by a record number of condo developments.
According to the figures, there were 42,212 total new home starts in the Toronto area in 2008, a 27% increase from the previous year. But the notable jump in housing starts should not be considered an indication of blue skies on the horizon. Only 11,305 of those homes were single-family detached homes, a drop from 14,769 in 2007.
“Construction of new single detached homes, which is really a better barometer of real time housing demand, the single detached homes continued to slow in 2008,” said Ted Tsiakopoulos, CMHC’s regional economist. He predicts that last year’s surprising home starts will be the peak, with CMHC officially estimating housing sales this year will drop to 32,000.
Source: Matthew Coutts, National Post
January 10, 2009 in Toronto Real Estate Update | Permalink | Comments (2) | TrackBack
Toronto Real Estate Board Reports:
2,500 sales in December (-44%); 74,000 sales in 2008 (-20%).
Toronto Real Estate Board members reported 2,577 sales in December 2008, compared to the 4,646 recorded during the same month in 2007, and the 4,447 recorded in December 2006, TREB President Maureen O’Neill announced today. “Sales for the whole of 2008 were 74,552, compared to the 93,193 recorded in 2007, and the 83,084 recorded during 2006.”
The average price in December of 2008 came in at $361,415, compared to $394,931 last year, and $336,217 in December of 2006. For 2008 as a whole, prices averaged $379,347, compared to the $376,236 recorded in 2007, and the $351,941 average recorded in 2006.
City of Toronto sales down 52%
The City of Toronto (416) recorded 1,105 sales in December, compared to 2,302 in December 2007 and 1,827 in December of 2006. For all of 2008, there were 29,878 sales, compared to 39,052 in 2007 and 34,404 in 2006.
The average price in the city was $387,482 compared to the $425,842 recorded in December of 2007 and the $350,139 recorded in December 2006. For all of 2008 the average was $410,271. In 2007 the comparable figure was $412,480, and in 2006 $378,776.
The 905 area saw 1,472 sales in December, from 2,344 in December of 2007 and 2,620 in December of 2006. For all of 2008, there were 44,674 sales in this region, versus 54,141 in 2007 and 48,680 in 2006.
The average price in the 905 was $341,847 in December, compared to $360,307 in 2007 and $326,509 in 2006. For all of 2008, the average was $358,665, as compared to $350,092 in 2007 and $332,976 in 2006.
Breaking down the total, 993 sales were reported in TREB’s 28 West districts and averaged $338,855; 473 sales were reported in the 14 Central districts and averaged $479,095; 491 sales were reported in the 23 North districts and averaged $381,975; and 620 sales were reported in TREB’s 21 East districts and averaged $291,488.
Median Price
The median price for December was $305,000, compared to $320,950 in 2007 and $290,000 in 2006. For all of 2008, the Median was $325,000, as opposed to 320,950 in 2007 and $299,000 in 2006.
See full Toronto Real Estate Market Watch report »
January 9, 2009 in Toronto Real Estate Trends | Permalink | Comments (3) | TrackBack
2009 Real Estate Market Forecast
Royal LePage sees a correction but not a crash for the Canadian real estate market in 2009. The Average house price is forecast to fall 3.0% nationally and 4% in Toronto.
After experiencing a significant reset in 2008 - a reaction to continuous dire news surrounding the health of the global economy combined with a cooling from the previous years' fervid activity levels - Canada's resale real estate market should see only modest price and unit sales corrections take place across the country during 2009. Both national average house prices and the number of homes sold is expected to decline this year, according to the Royal LePage 2009 Market Survey Forecast released today.
Nationally, average house prices are forecast to dip by 3.0 per cent from last year to $295,000, while transactions are projected to fall to 416,000 (-3.5 %) unit sales in 2009. In spite of this cooling trend on a national level, price and activity gains are anticipated in some provinces.
Emotional reaction to recent economic and political instability did much to dampen consumer confidence during the latter part of 2008, causing a marked slowdown in house sales activity. However, as a more rational understanding of the issues gains ground, together with a wide range of announced corrective measures, consumer confidence is anticipated to recover, prompting real estate activity to pick up once again in the latter half of 2009. Further, Canada in 2009 enjoys a stronger economic foundation than most countries and that should temper the housing market correction. The combination of low inflation, reasonable employment levels and improving housing affordability, driven in part by low mortgage rates, are anticipated to stimulate demand in the coming months.
"While Canada's housing market is anticipated to continue to move through a period of adjustment over the next six months, we should expect modestly lower home prices, not a U.S.-style collapse, which was brought on by a structural failure of the entire American credit system," said Phil Soper, president and chief executive of Royal LePage Real Estate Services. "Most consumers are not aware that nationally, Canadian housing market activity peaked in 2007 and has been adjusting lower since. We are well into this inevitable cyclical correction."
Added Soper: "While a grey cloud hangs over some markets, the sky is not falling. In recent years, Canada has been a difficult place to be a purchaser of real estate, particularly for first-time buyers. When real estate markets correct, inventory levels rise, providing buyers choices instead of frustrating bidding wars. In 2009, appropriately-priced homes will still sell for fair value."
The housing market is expected to perform quite differently from region to region across the country. In many mid-sized cities where home prices remain below the national average, such as Regina and Winnipeg, prices are expected to increase moderately through 2009, as home ownership remains particularly affordable. The most significant price decreases are forecast for Canada's most expensive city, Vancouver, which has experienced above average price increases for most of the decade. The correction is a natural cyclical reaction to an extended period of high price appreciation. Vancouver's fundamentals, including growing population figures and the positive economic spinoffs expected from the 2010 Olympics, remain very positive.
Observed Soper: "For several years, Vancouver experienced aggressive price run-ups in response to overwhelming levels of demand - conditions, which eventually reached a tipping point. While buyers will be acquiring properties for less in 2009, it is important to note that prices are coming down from all-time record levels."
Secondary Ontario markets heavily populated by people working in the manufacturing sectors are also anticipated to experience greater than average declines in house prices and activity levels in 2009. In contrast, real estate in Montreal and Ottawa is poised to remain stable, with average house prices relatively flat through 2009.
After moving through a period of correction that started in 2007, well before other regions in the country, both Calgary and Edmonton's housing markets are anticipated to return to a growth state later in 2009, characterized by stable average house prices and increased unit sales. Despite slowdowns and delay with some major energy projects, Alberta's economy remains one of the strongest in Canada.
Looking east, Halifax's real estate market is expected to experience very modest price appreciation through 2009. After experiencing strong price increases over the last year and a half, the market has hit its capacity for absorbing rising prices and activity levels. The city's diversified array of industries is expected to bolster the economy and continue to create solid employment opportunities, stabilizing home values.
Canadians have been confused and justifiably skeptical of the efforts of the worlds' central banks and governments to combat the global economic crisis. There is broad belief, however, that Canada's financial house is in better shape than many peer countries, particularly the U.S. While the federal and most provincial governments have been slow to implement economic stimulus packages, they enjoy broad public support in principle. Together with the actions taken by the Bank of Canada, the positive impact on consumer confidence stemming from infrastructure spending announcements and other stimulus programs is expected to be significant.
Concluded Soper: "We believe that the Canadian economy will struggle early in 2009, but that conditions will progress continually throughout the year. Improving credit markets, the stimulative impact from a weaker Canadian dollar, together with the implementation of large fiscal stimulus initiatives, set the stage for a return to growth in the second half of 2009."
Economic Factors Impacting 2009 Forecast
Global Economic Woes
No country is impervious to the current economic woes being felt around the world. The poor performance of the equity markets and the constant stream of pessimistic economic news had a very negative impact on housing activity in Canada in 2008. Consumer confidence is expected to slowly recover during 2009 as the impact of the many corrective actions introduced and announced takes root.
Tempered, but continued growth in emerging economies, particularly China, India and Brazil, should mitigate the downside risk to Canadian commodity exporters.
Foreclosure Figures in Canada
Foreclosure rates in Canada are expected to increase, but remain very limited, especially when compared to the U.S. experience, where a broad structural failure of the credit system occurred. Canada's relatively insignificant subprime market, and in turn, the low number of Canadians contractually committed to very risky mortgages, should result in a foreclosure rate of insufficient volume to impact house prices or transaction activity.
Employment Rates
Across the country, employment rates are expected to erode somewhat in 2009, but remain at long-term healthy levels. Some areas in Ontario, and to a lesser extent Quebec, that have high levels of manufacturing jobs, may experience greater than national average unemployment. Areas in Alberta tied to the energy sector may see short-term employment declines, but the province's tight overall labour market is expected to mitigate the downside.
Interest Rates
The Bank of Canada's overnight target-lending rate, already at very low levels, is expected to be reduced again early in 2009. This should bode well for home buyers in 2009 as loosening credit spreads allow banks to offer more aggressively priced mortgages.
January 6, 2009 in Toronto Real Estate Forecast | Permalink | Comments (3) | TrackBack
Toronto real estate in scary times
If any one emotion drove Toronto's real estate market in 2008, it was anxiety, and the waning days of the year have been the most fickle of all. Homeowners and potential buyers were shaken by a 44% plunge in housing sales in Ontario in November, compared with the same month last year.
As a result, the usual seasonal slowdown that takes place in December was even more pronounced this year, real estate agents throughout the city say, while prices for some houses look more like those last seen in 2006 and 2005.
Buyers' see - or think they see - things being cheaper in 2009
The drop in prices, coupled with low interest rates, will be drawing out some buyers but how many only time will tell.
While the sellers' market made some Toronto homeowners arrogant in the past, every offer made this year has to be treated with respect.
January 3, 2009 in Toronto Real Estate Trends | Permalink | Comments (5) | TrackBack
