« April 2009 | Main | June 2009 »

Bidding wars make a comeback?

As housing sales return to positive territory, parts of the Toronto market go from 'famine to frenzy'.

Annoyingly for buyers, rejoicingly for sellers, bidding wars for Toronto real estate have surged back from extinction. House sales for the first two weeks in May were in positive territory – 3% above the same period in 2008 – for the first time since the market's tailspin last fall.

"Buyers have returned to the market with the realization that apart from manufacturing and construction, the GTA economy is holding up well," said housing analyst and economist Will Dunning. "The surge in the stock market and the change in tone from the U.S. are also lifting confidence."

And with confidence comes a crush of buyers. Among them is developer Ross Cammalleri, who last month had his eye on what appeared to be an underpriced bungalow in the family-friendly area of Yonge St. and Lawrence Ave.

Cammalleri figured it was worth $500,000.

What he didn't expect were 10 other interested buyers. "That was a surprise, especially since the winter market was dead."

He ended up with a winning bid of $564,000, $134,000 more than the list and equivalent to 131 per cent of the asking price.

Cammalleri's story is another twist in a Greater Toronto Area real estate market that has been surprisingly resilient: The arrival of spring has seen the resurgence of bidding wars for property as a lack of product on the market and record low mortgage rates have brought out buyers in force.

A property near Danforth Ave. listed for $549,000 sold for $715,000 on Monday, or 130 per cent of the asking price. The semi-detached four-bedroom home on a 20-foot lot was underpriced by the vendor to generate interest.

The strategy is not popular with all agents, and has come under fire from some who say it does not necessarily generate a higher price.

If multiple offers are made on the property, the agent ends up "looking like a hero" just because the property was underpriced in the first place, argue Toronto realtors Thomas and Sally Cook.

Others say the strategy is a time waster for potential buyers who would not have bid on the property if they knew the price was not realistic.

But overbids are not as spectacular as they once were. In 2007, at the peak of the market, one Beach-area home sold for $1.9 million – more than $600,000 over asking price.

And most of the interest seems to be in popular downtown neighbourhoods, as opposed to the suburbs. Another characteristic: Unlike the boom times, many of the bids are not going over asking.

Cammalleri admits his was the exception to the rule. "Did I overpay?" he says. "Yes, I probably did, but this was a property I couldn't afford to lose."

Cammalleri plans to develop a new house on the site and hopes to sell it for more than twice what he paid for the original property.

As both a buyer and a seller in the current market, he has a unique view. His company, JRC Developments, recently had three properties near Yonge and Lawrence. Each was listed at $1.2 million. "They sat there for six months," he say. "Nobody was buying anything."

Then, in March, all three properties sold, two with multiple offers, although the selling prices did not go over list. "The snow melted, the grass looked greener, and we went from famine to frenzy," he says.

Still, buyers are much more level-headed, with similar houses going for about $1.4 million during the peak in 2007, he says.

Despite the multiple offers in the spring market, some analysts are wondering whether summer will be sombre. Average existing home prices are forecast to fall by about 5 per cent by the end of the year.

And while consumer sentiment is getting a lift from the more positive economic news, the ride ahead could be bumpy.

"Recent data releases have been portrayed as much improved and as signalling a pending economic turning point," says Dunning. "I remain skeptical."

"I caution that improved affordability generally results in a short-lived wave of buying. So we may see several good months, but there could be another slowing in the second half of the year."

Source: Tony Wong in the Toronto Star.

May 31, 2009 | Permalink | Comments (5) | TrackBack

Royal LePage First-Time Buyers' Report

Affordability and job security are the most important factors for first-time home-buyers. New government incentives help but market fundamentals more important, Canadians say.

Canadians who are considering purchasing their first home are primarily motivated by lower home prices and very low interest rates, but some require confidence in the economy and their employment prospects before they will enter the market, according to a report released today by Royal LePage Real Estate Services. Eighty-six per cent of potential first-time buyers say low interest rates make them more likely to purchase a home; 81 per cent cite lower housing prices as a motivating factor; while 76 per cent cite job security and 64 per cent say a stable economy is an important factor in their decision to buy.

Potential buyers were asked to rank their top incentives for purchasing a first property. While home prices and interest rates took the number one and two rankings, respectively, the third most popular incentive was the First-Time Home Buyers’ Tax Credit. The recently introduced Home Renovation Tax Credit for 2009 was cited by 42 per cent of potential first-time buyers as either ‘very likely’ or ‘somewhat likely’ to impact their purchasing decision.

“When first time buyers stepped out of the market in the fourth quarter of 2008, at the height of the global recession, their absence was profoundly felt. Without significant volumes of entry-level homes trading hands, the entire market limped through the winter months. First time buyers are back in force this spring, and with them the beginnings of a market recovery. While these consumers appreciate government incentives such as tax credits, greater RSP deduction limits and rebates on home renovations, it is markedly improved affordability that is proving to be the powerful drawing card," said Phil Soper, president and chief executive of Royal LePage Real Estate Services. “Our survey demonstrates how important affordability factors such as interest rates and house prices are in stimulating demand."

Across the country, potential first-time homebuyers agreed that affordability was their top consideration, however the survey also revealed differences amongst buyers in various regions of Canada. In provinces such as British Columbia where high housing prices have kept some buyers out of the market in recent years, 92 per cent of potential first-time buyers are now motivated by low interest rates and 96 per cent say lower home prices are likely to prompt them to buy.

In Atlantic Canada, where local economies have been resilient in the face of a worldwide recession and housing markets remain stable, 43 per cent of first-time buyers say they that job security is a factor in their decision to buy, while 84 per cent of buyers in British Columbia and Alberta said job security will influence them.

Atlantic Canadians were less motivated than other Canadians by declining interest rates, with only 72 per cent saying it will likely prompt a buying decision, compared to 86 per cent of Canadians overall. Buyers in Ontario and Quebec rated the Home Renovation Tax Credit as a bigger factor in their buying decision, compared to the Canadian average.

Mr. Soper continued, "The significant response differences from region to region show how closely the residential real estate market is tied to broader economic trends and consumer confidence. Buying your first home is a major life decision, and people are more likely to purchase a home if they feel comfortable about the state of the economy and confident that they will have a job to support their new mortgage obligation.”

Regional Summaries

Atlantic

Overall activity in the housing market has remained steady in the Atlantic region with first-time homebuyers continuing to enter the market. Low interest rates and recent government incentives, such as the Home Renovation Tax Credit, greater RSP deduction limits and the First-Time Homebuyer’s Tax Credit speak to affordability. Buyers in this area are entering the market that would not have a few years ago, due to these influencing factors. Entry-level buyers in Newfoundland, Prince Edward Island, New Brunswick and Nova Scotia continue to search for detached bungalows, with the average price ranging from $157,000 in Charlottetown to $215,667 in Halifax during the first quarter of 2009.

Quebec

First-time buyers continue to pursue the dream of home ownership in Montreal, as the number of entrants to the housing market has remained relatively stable. Low interest rates are contributing to increased market entry with 41 per cent of first-time buyers suggesting this is the key incentive driving the purchase of their first property, followed by 13 per cent who suggest lower housing prices might influence their buying decision. With 47 per cent of new buyers in Quebec planning to settle in urban areas, buyers are planning to invest and live in their first home for ten or more years. Fifty-six per cent of first-time buyers hope to purchase a property in the $150,000 to $300,000 price range.

Ontario

Encouraged by recent government initiatives, home ownership in Ontario is becoming a reality for an increasing number of younger purchasers. Across Ontario, 36 per cent of potential first-time buyers are most likely to purchase property in an urban setting. Condominiums continue to attract first-time buyers in the Greater Toronto Area with urban communities at accessible price points appealing most to market newcomers. In addition to affordability, location is a leading factor dictating condominium appeal. Neighbourhoods in Toronto’s east and west downtown core are popular with first-time buyers. In Ottawa, affordability continues to drive activity and most first-time buyers are opting to purchase in suburban areas where properties typically cost $50,000 to $75,000 less than in the city centre. Active first-time buyer markets include Orleans, Barrhaven and Kanata.

Manitoba & Saskatchewan

Thirty per cent of Prairie buyers planning on purchasing their first home in the next three years will choose a detached bungalow. The second-most popular choice for first-time buyers is condominiums at 21 per cent, followed by detached two-story homes at 15 per cent. In Winnipeg, up-and-coming neighbourhoods for first-time buyers include River Heights – which has traditionally been attractive for people entering the market – Fraser’s Grove and East / North Caldonin. With a good selection of older bungalows and two story homes, Broders Annex is the hottest neighbourhood for first-time buyers in Regina.

Alberta

Alberta’s urban centres continue to be popular with first-time buyers, who make up nearly a third of home sales in both Calgary and Edmonton. Condominiums and detached bungalows are the most popular choices for first-time buyers in Edmonton, where lower housing prices and low interest rates are the biggest incentives for buyers entering the market for the first time. Popular areas for new buyers include the suburbs, where a new condominium may be within budget, the university area, where many parents are buying for their kids, Allendale and McKernan. In Calgary, new buyers are most interested in inner city condominiums and detached houses in the suburbs, with many seeking new or renovated homes.

British Columbia

With home prices either flat or declining in many communities in British Columbia and with interest rates at record lows, first-time buyers are taking advantage of greater affordability, with female buyers leading the trend. Sixty per cent of the buyers getting into BC’s housing market for the first time are women. In British Columbia, 40 per cent of prospective first-time buyers intend to purchase a ‘fixer-upper’ while 80 per cent would take advantage of the Federal Government’s Home Renovation Tax Credit in making upgrades to a home. First-time buyers in Vancouver are favouring condominiums and townhomes, however an increasing number of entry-level buyers are finding affordable detached homes outside the city in the Fraser Valley suburbs.

The survey portion of the Royal LePage First-Time Homebuyers' Report was conducted by Pollara from April 29, 2009 to May 8, 2009 among 474 first-time homebuyers in Canada. The online survey was conducted among a randomly-selected sample of 474 adult Canadians who are likely to purchase their first home in the next 3 years. A probability sample of this size with a 100% response rate would have an estimated margin of error of +/- 4.5 %, 19 times out of 20. The data was statistically weighted to ensure the sample's regional and age/gender composition reflects the actual Canadian population according to the most recent Census data.

See the Royal LePage First-Time Homebuyers’ Report 2009 »

May 27, 2009 in Canadian Real Estate Market | Permalink | Comments (4) | TrackBack

Toronto Real Estate Board:

Almost 500,000 Square Feet Leased In April

Toronto Real Estate Board Members reported 466,837 square feet of leased space in April, Commercial Council Chair Garry Lander reported today. This is in comparison to the 1,108,430 recorded in April of 2008. "While still trading below last year's levels, the result represents an 11 per cent month-over- month increase from March," Mr. Lander noted.

Industrial space in all size categories leased for $5.43 last month, unchanged from April 2008. Commercial space traded for $14.22, down five per cent from the $14.91 figure seen in April of 2008.

Sales Market Highlights

TREB Members recorded 30 sales of IC&I properties in April, including 15 industrial buildings of all size categories which averaged $61.33 per square foot. This compares to the $100.98 per square foot obtained from non-MLS® source.

May 26, 2009 | Permalink | Comments (0) | TrackBack

Doors Open Toronto

See the places you never could ... for free

How would you like to take a peak inside the Don Jail and see what really goes on there? Or maybe you've always been curious about what happens backstage at the Elgin and Winter Garden Theatre but have always been stuck out front in the seats.

Ever wondered what's actually in the famous Flatiron Building on Wellington Street? And when was the last time you really got a look inside Old City Hall - or even its replacement? All are places you see every day but may never have been able to enter.

But this weekend, you'll get your chance. It's the annual Doors Open Toronto, a yearly event that takes the public into the inner reaches of buildings and institutions they're normally never allowed to access.

From mosques, synagogues and churches to museums and bowling alleys, there are more than 175 tours of famous and sometimes not so famous places on the list, most offering a unique backstage pass not normally accessible to the public.

And the best part is it's free. All you have to do is show up.

It's the 10th year for the festival, which runs on Saturday and Sunday - although some buildings will be available for tours on only one of those days. Project manager Jane French calls making it through a decade "a major accomplishment."

What are her plans for the weekend? "I'm going to start at City Hall ... answering questions ... and then I'm probably going to go to Union Station," she reveals. "And then there's a ravine walk." As for the most popular places you haven't seen? Last year's record breaking attendance at a building was at BAPS Shri Swaminarayan, an incredibly ornate museum highlighting Indian culture.

"That had 17,000 visitors last year," French explains. "Old City Hall had about 7,000, 8,000."

Among the other places you'll be able to tour:

See the Door Open Toronto website for more information on the locations and the tour times »

May 23, 2009 | Permalink | Comments (0) | TrackBack

Toronto loses real estate icon

SADIE MORANIS FRI, CMR

Sadie Moranis passed away peacefully in her 84th year on Thursday, May 21, 2009 in Toronto. She will be greatly missed by her son Stephen, her daughter-in-law Monica and her granddaughter Rebecca. Sadie's husband Jules and daughter Terry sadly predeceased her. Sadie will be forever remembered by her sister Betty Dale, her brother-in-law Harvey Dale, her niece Susan Dale (Jim Laing) and her nephew Lawry Dale (Elise Teitler). Sadie also leaves behind her sister-in-law Anne Moranis, her brother and her many nieces, nephews, great nieces, great nephews and cousins.

Sadie was an accomplished pianist having studied with Boris Berlin at the Royal Conservatory, an editor of the Varsity at University of Toronto and an accomplished athlete and sportswoman who loved tennis, badminton, boating and fishing. When Sadie started in real estate, she was a 37-year old homemaker, and seventeen years later she became the first woman president of the Toronto Real Estate Board, in its sixty-year history.

Today Prudential Sadie Moranis Realty is one of Canada's leading real estate companies. Driven to succeed she wanted to prove that given equal opportunities, a woman can accomplish as much as a man; she refused to let anything deter her from what she was capable of doing. And so, Sadie grew her company from a neighbourhood brokerage to one of Toronto's largest and most respected agencies.

Sadie's zeal for life in the face of surviving breast cancer in 1977 to her most recent health related issues can be best described when she acclaimed, 'When you think you have problems, remember that other people may have problems greater than yours'.

Our sincere sympathies are extended to the Moranis and Dale families.

May 22, 2009 in Real Estate Personalities | Permalink | Comments (3) | TrackBack

Toronto Real Estate Board:

Greater Toronto Resale Housing Sales Up in First Half of May

Greater Toronto Realtors reported 4,561 transactions in the first half of May - an increase of three per cent compared to May 2008. "Members reported a rise in buying activity this month," said TREB President Maureen O'Neill. "Many home buyers who were undecided about purchasing a home during the winter months are now proceeding with confidence as a result of the GTA housing market's affordability."

The average price for MLS® sales was in line with last year, down by less than one-half of one per cent at $399,811.

"More sales and fewer listings resulted in tighter market conditions which pushed the average selling price back up to last year's level," according to Jason Mercer, TREB's Senior Manager of Market Analysis. "Look for new listings to increase as home owners react to the positive news surrounding home sales and prices."

May 20, 2009 in Toronto Real Estate Update | Permalink | Comments (3) | TrackBack

The Power of Curb Appeal

Improve your home's value with these tips

When putting a house up for sale, one of the most important factors you should consider is your home's exterior as this is the first step to draw potential buyers. It's what is known as curb appeal. Here are some changes that will make your home more attractive and functional, and they're also the ones that will give you the most impact for your resources.

First, create an inviting walkway for your guests and potential buyers. Lay bluestone or any other type of slate over the typical concrete steps or walkways to add warmth to an otherwise cold entry.

Replace old columns

Most front porches have columns that are visually too small to support the roofs. Replace all columns that are 4"x4" with larger ones. It will look and feel better if you do.

Change out your light fixtures

For some reason, porch lights are often hung at the wrong height and are not in good scale with the entry. When hanging sconces, put them a bit higher than your eye level to reduce glare. For those of you with unusually high entryways, try independent lights. It's an easy way to add elegance to your home.

Consider replacing the front door and windows

Make sure your entry door does not clash with the style of your home. If you have an arts and crafts bungalow, stick with a door appropriate to that style. If you have a contemporary home, your door should be contemporary. Don't get caught up in the fads of the time. Consider, too, the style of the interior. This is also true of windows.

Replace your windows

If you have an older home, it will probably benefit greatly from the energy saved with new windows. Keep the style of the windows the same as the home's architecture for the best outcome. Replacement windows are less expensive because they are made to sit inside the present frame. Most window companies can replace the windows in this manner in a single day.

Add dormers

Dormers break up a large growth expanse and provide depth and balance to the front of the home.

If repairing or redoing stucco, consider getting some of the foam core crown molding made for exteriors. A little goes a long way to dress up your home. You have your stucco man cover right over the crown molding for a plush look.

Add or replace shutters

Make sure your shutters are not too small for the window. They technically should be wide enough to cover the window opening when closed. Mount operable shutters slightly away from the home. Shutters will provide a decorative element that further defines the character of your home and gives it a custom look.

Add flower boxes to windows

Flower boxes help add color to a home's exterior and make the windows appear taller from the street.

Replace older shrubbery that has grown too large for your home. If you want to make your home appear taller, use smaller shrubs. Watch out for shrubs that are overgrown as they can easily "swallow up" a small home.

Landscape all the way out to the street

For goodness sake, understand that the days of a straight hedge at the front wall of the house to the street are over. The same goes for lawn that stretches from the home to the street with practically nothing of interest. Remember that the exterior decor should utilize focal points and group your plants together. Don't string them out, soldier fashion, along the front of your house or the sidewalk leaving the in between areas bare or endless grass.

Exterior lighting is important

Exterior lighting can warm the look of a home without creating distinct points of light. Where space is limited, well-placed exterior lighting can replace pendants or sconces at the entryways. The home will be further enhanced if the materials and lighting are of the same style as the home.

Improve your driveway and make it more appealing

Use saw cut, apron pavers or stamped concrete in place of regular concrete for the driveway itself. Try changing the location of the driveway so that it sweeps across the front yard, but is still functional. You want the view from the driveway to be of the home instead of the garage door.

To disguise the garage door, build a 2 ft. trellis or arbor with vines over the garage; it will give the garage a softer cottage look and feel.

For a side entry garage, plant evergreen trees to hide the turn around area next to the garage, putting the focus on the front of the house.

Frame a doorway with plants

Try using boxwoods, steeds holly, dwarf Alberta spruce, smaller holly trees or arborvitae. Potted plants can be moved around and taken with you when you move away.

Plant the right things in the right places

If low sunlight is a problem, don't fight it. Low maintenance plants that can grow with little sunlight are azaleas, dwarfs and regular mondo grass, weeping Japanese maples, autumn ferns and hydrangeas. Your nursery can guide you on the varying needs of sunlight and water for each plant you buy.

For big results, think small

Trench the edges of your flower beds to create smooth sweeping lines. Freshen your mulch or pine straw. Get your lawn on a regular fertilizer program.

Simple low voltage lighting at entry points and specimen trees can add a lot of flair to the yard. Highlight and accentuate entryways with annuals.

Keep it simple

Don't confuse guests. Have a clear and defined path from a parking area to the home's entrance. Create paths out of stone or other materials that complement the house.

Study the color palette of your home

Determine the most complementary color for both body and trim of your home. Some houses look better with muted color schemes rather than the standard white trim. Consider an off white trim with a complementary color for the body of the house. I just passed a home with a white garage door, some white trim here and there, a fairly dark olive green body and a large black front door. The shutters on the windows and window trim was also black. Very stunning and quite unique.

Assess your roofs

Asphalt roofs look best in either black or slate gray. For more informal homes, pressure treated cedar shake roofs have wonderful color and texture. Slate roofs give a premium look to any home. Raised-seam metal roofs are a great option for homes that seek to achieve a distinctive older look.

Enhance the trim

Add wood pediments over the windows or over the front door. There are several sources for ready-made trim that is designed for standard sized openings.

Upgrade your door's hardware

Go to premium hardware companies and look at the options for door latches. Georgian-style homes should have polished brass fixtures, while country French and many cottage-style homes can use fixtures with darker finishes, such as oil-rubbed bronze or pewter gray.

Do your research

For older houses, look for lighting fixtures that look like old carriage lanterns or gas lanterns. Finishes should be black or aged copper. For an extra special look, replace the glass with seedy glass and use lower wattage bulbs. If you have a larger budget, consider installing a gas line to make the fixture a real gas lantern.

Avoid clutter

Stay away from helter-skelter objects in your yard. Pick a focal point or two for the art and leave the rest to more clean and understated design.

Think about function

If you want to use your yard for entertaining or just lazy days sipping sweet tea, make sure you have nice, clean seating and an easy to grow garden.

Keep it clean

Periodic pressure washing will remove molten debris off siding, decks, driveways and walkways leaving a pristine facade on your home

Add planters

Put seasonal plants in pots that will spill over with color and make the front door a focal point.

Make it Low maintenance

Hardier plants will continue to look attractive in the colder months of the year, giving your yard year-round appeal.

May 16, 2009 in Curb Appeal | Permalink | Comments (3) | TrackBack

Real Estate Recovery ... or Bounce?

Canada's home resale market showing signs of recovery as it rises for third straight month.

Canada's housing market shows every sign of having bounced back from its recessionary bottom, with both the number and price of homes rising for the third straight month in April. The Canadian Real Estate Association said homes sales soared 11.2 per cent on a seasonally adjusted basis from March, the biggest jump in five years, and with 34,838 units trading hands, the highest level in seven months.

Meanwhile, the national average sale price of homes listed by realtors also rose in April to $306,366 in April. But while encouraging, the report noted that both sales activity and prices remain at levels lower than a year ago, indicating the housing market has yet to fully recover to pre-recession levels.

The average home resale price is down 3.2 per cent from a year ago and down almost 10 per cent from the peak of $324,000 reached in December 2007.

Economists with Scotia Capital pointed out in a note to clients that the resale housing market does little to increase gross domestic product since it involves paper transactions, and that new home construction remains weak.

"(And) we seriously doubt its sustainability, especially into the next decade," added economists Derek Holt and Karen Cordes, explaining that low mortgage rates are likely pushing future demand forward as home-buyers seek to take advantage.

"We are, after all, still dealing with the highest stock of unsold new homes and the highest ratio of resales to listings since the mid-1990s."

TD Bank economist Paul Gauthier is also hedging his bets and still expects prices to decline a total of 20 per cent during the recession, with half of that slide having already taken place.

"So far, the first four months of 2009 lends credence to the view that improved affordability is winning out against the weak economic backdrop of a recession," he explained. "But we are still in the early rounds of a bout that has yet to fully play out."

Still, the housing news is more solid than many other indicators in the recession-battered economy.

Bank of Montreal economist Robert Kavcic noted that the average home price was now only 3.2 per cent lower than a year ago, the slowest rate of decline in nine months. And even that price drop is being exaggerated by the sharper drop-off in the most expensive cities, with prices Vancouver, Calgary and Toronto falling about 10 per cent.

The average residential price broke all previous monthly records in Saskatchewan, Manitoba, Quebec and Nova Scotia.

The real estate group said rebounding consumer confidence and lower home prices have contributed to the market improvement in recent months.

April's sales improvement follows advances of 7.7 per cent in March and 10.3 per cent in February, with 70 per cent of local markets recording an increase.

Regionally, British Columbia, Alberta, Ontario and Quebec showed improved results with the lion's share of gains coming in Toronto (10 per cent), Vancouver (30 per cent), Montreal (15 per cent) and Calgary (15 per cent).

CREA said the lower supply of homes coming onto the market helped balance supply and demand in April.

The association said that, without seasonal adjustments, the number of actual home sales were 11.8 per cent lower than last year.

The residential dollar volume of sales increased to $10.2 billion, the first time since last September that it surpassed $10 billion.

"If the trend for sales activity over the past few months persists, the number of transactions in May could surpass the pre-recession levels of September 2008," said CREA economist Gregory Klump.

He noted that in the past two recessions, sales activity bottomed out before the job market or the economy, but that improved affordability may result in the housing market leading the economic recovery this time.

May 15, 2009 in Canadian Real Estate Market | Permalink | Comments (2) | TrackBack

Lots of cranes, few sales

The state of Toronto’s condo market:

Despite a record number of construction cranes gracing the horizon, Toronto’s once thriving new condo market hit a dismal sales low in the first quarter of 2009, according to an industry analysis revealed yesterday. Urbanation Inc., which researches the development industry, reported that the number of sales recorded during the first quarter dipped to 917 units – the lowest level since 1996 and a far cry from the high of nearly 7,000 units sold in the second quarter of 2007.

“It’s a decline of 73% over the performance of last year, of 2008,” said Jane Renwick, executive vice president of Urbanation. “The market really came to a halt in October, November and we haven’t picked up momentum through the first quarter.

See article by Allison Hanes, National Post »

May 12, 2009 in Toronto Real Estate Trends | Permalink | Comments (2) | TrackBack

Housing starts lowest since 1996

The 20% drop attributed to decline in multiple starts,
especially in Toronto's condominium segment.

The Canadian construction industry may have been the engine of economic growth for much of this decade, but recent figures show that it hasn't been firing on all cylinders. Canadian housing starts cratered by a much-greater-than-expected 19.9 per cent to 117,400 annualized units in April compared with March, the slowest pace of residential construction activity since 1996, according to figures released by the Canada Mortgage and Housing Corporation yesterday.

"Overall, the construction downturn continues to have a coast-to-coast footprint, with Western Canada and Ontario faring worst," said BMO Capital Markets economist Robert Kavic. Much of that decrease was recorded in Toronto, where the volatile multiple starts segment, which includes condominium buildings, brought down the overall national average.

The seasonally adjusted and annualized rate of starts fell for the first time in three months in the Toronto market to 16,300 units, representing a 55 per cent drop from the prior month. The condominium segment fell by 65 per cent, while single-detached housing fell by 3.5 per cent.

"The economic fundamentals continue to point to further weakness in Canadian housing activity," said Ian Pollick, economics strategist for TD Securities in a research note. "The housing sector is likely to remain a drag on Canadian economic activity." One silver lining might be that a decrease in activity will finally chip away at the prior six years of overbuilding, economist Kavic said.

It was a point echoed by other economists, including Pollick. "We cannot ignore the fact that the reduction in starts is likely to keep inventories contained, which is a good thing during a recession."

The CMHC points out that a high number of condominium sales in the Toronto market in the first half of last year will likely result in an increase in starts in the second half of this year.

But some of those projects may not proceed, since some builders have had trouble meeting the 60 to 75 per cent sales threshold banks require before loaning money.

For the first quarter of 2009 new home sales are 60 per cent lower than in 2008, and 75 per cent lower than in 2007.

Meanwhile, the Ontario Home Builders' Association reported yesterday it was seeing increased traffic during the spring market after "an extremely slow period of activity in the winter."

But the province's proposed harmonized sales tax, which is expected to be implemented next year, remains a sore point.

"Just as builders were starting to see signs of life in sales offices in the early spring selling season, the province announced plans to increase the costs of new homes with a harmonized sales tax," the builders' association said.

Source: Tony Wong in the Toronto Star

May 9, 2009 | Permalink | Comments (3) | TrackBack

 

Thank you for visiting!