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December Stats
Jan 03, 2019
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January 3, 2019

Metro Vancouver home sales decline below historical averages in 2018

Metro Vancouver home sales in 2018 were the lowest annual total in the region since 2000.

The Real Estate Board of Greater Vancouver (REBGV) reports that sales of detached, attached and apartment properties reached 24,619 on the Multiple Listing Service® (MLS®) in 2018, a 31.6 per cent decrease from the 35,993 sales recorded in 2017, and a 38.4 per cent decrease compared to the 39,943 residential sales in 2016.

Last year’s sales total was 25 per cent below the region’s 10-year sales average.

“This past year has been a transition period for the Metro Vancouver housing market away from the sellers’ market conditions we experienced in previous years,” Phil Moore, REBGV president said. “High home prices, rising interest rates and new mortgage requirements and taxes all contributed to the market conditions we saw in 2018.”

Home listings in Metro Vancouver reached 53,614 in 2018. This is a 1.9 per cent decrease compared to 54,655 homes listed in 2017 and a 6.9 per cent decrease compared to the 57,596 homes listed in 2016.

“The supply of homes for sale will be an important indicator to follow in 2019. We’ve had record building activity in recent years and many projects will complete soon. This will provide additional housing options for home buyers across the region,” Moore said.

The MLS® HPI composite benchmark price for all residential homes in Metro Vancouver ends the year at $1,032,400. This is a 2.7 per cent decrease compared to December 2017.

“As the total supply of homes for sale began to accumulate in the spring, we began to see downward pressure on prices across all home types throughout the latter half of the year,” Moore said.

The benchmark price of detached homes in the region declined 7.8 per cent over the last 12 months and 7.3 per cent since June 2018. Apartment homes increased 0.6 per cent over the last 12 months and have declined 6.4 per cent since June 2018. The benchmark price for townhomes in Metro Vancouver have increased 1.3 per cent since December 2017 and have decreased 5.3 per cent over the last six months.

December summary

REBGV reports that residential home sales in the region totalled 1,072 in December 2018, a 46.8 per cent decrease from the 2,016 sales recorded in December 2017, and a 33.3 per cent decrease from November 2018 when 1,608 homes sold.

Last month’s sales were 43.3 per cent below the 10-year December sales average.

There were 1,407 detached, attached and apartment homes newly listed for sale on the MLS® in Metro Vancouver in December 2018. This represents a 25.6 per cent decrease compared to the 1,891 homes listed in December 2017 and a 59.3 per cent decrease compared to November 2018 when 3,461 homes were listed.

The total number of homes currently listed for sale on the MLS® system in Metro Vancouver is 10,275, a 47.7 per cent increase compared to December 2017 (6,958) and a 16.5 per cent decrease compared to November 2018 (12,307).

For all property types, the sales-to-active listings ratio for December 2018 is 10.4 per cent. By property type, the ratio is 7.1 per cent for detached homes, 12 per cent for townhomes, and 14.2 per cent for apartments.

Generally, analysts say that downward pressure on home prices occurs when the ratio dips below the 12 per cent mark for a sustained period, while home prices often experience upward pressure when it surpasses 20 per cent over several months.

Sales of detached homes in December 2018 reached 348, a 43.6 per cent decrease from the 617 detached sales recorded in December 2017. The benchmark price for a detached home is $1,479,000. This represents a 7.8 per cent decrease from December 2017 and a 1.4 per cent decrease compared to November 2018.

Sales of apartment homes reached 535 in December 2018, a 34 per cent decrease compared to the 1,028 sales in December 2017. The benchmark price of an apartment home is $664,100. This represents a 0.6 per cent increase from December 2017 and a 0.6 per cent decrease compared to November 2018.

Attached home sales in December 2018 totalled 189, a 49.1 per cent decrease compared to the 371 sales in December 2017. The benchmark price of an attached home is $809,700. This represents a 1.3 per cent increase from December 2017 and a 1.1 per cent decrease compared to November 2018.

Download the December 2018 stats package.

2019 real estate market outlook: a forecast summary
Jan 01, 2019

2018 was an extremely taxing – quite literally – year for B.C. real estate, in which taxation measures and other government interventions slowed down market activity considerably and creating a softening in average sale prices.

So what will the forthcoming year hold? A further sales slowdown, a plateau, or a recovery? Falling or rising prices?

As ever, industry organizations, brokerages and economists all have their opinions – which can differ widely, but often overlap.

Here’s a look at a range of forecasts and the general consensus in several areas of B.C.’s real estate market.

Sales activity

According to Central 1 Credit Union’s B.C. forecast, the provincial housing market is expected to remain “subdued” over the next three years. This is, said the report, “driven largely by the drag of federal B-20 mortgage ‘stress-tests’, government policies to constrain demand and higher interest rates.”

However, that doesn’t mean sales will fall further, said the credit union. Although they are expected to stay much lower than 2015-2017 levels, after a weak 2018, B.C. resale transactions are predicted to rise by 0.6 per cent in 2019, 3.8 per cent in 2020 and 2.2 per cent in 2021.

“In order for there to be a deeper crash, there would need to be a global economic recession, something that throws a lot of B.C. and the Lower Mainland out of work,” said Bryan Yu, Central 1’s chief economist. “That’s not something we have in our forecast right now.”

The Canada Mortgage and Housing Corporation’s (CMHC) Housing Market Outlooklargely agreed, predicting, “Overall, we anticipate MLS sales to trough in 2018 and see some recovery in 2019-20.”

The Canadian Real Estate Association’s forecast was much less optimistic about B.C. sales activity next year. CREA said that, following an overall 24.2 per cent annual decline in home sales across B.C. in 2018, resale transactions would drop in the province by a further 5.2 per cent in 2019.

The B.C. Real Estate Association went in the other direction with its sales predictions, taking a bullish stance. It said in its November forecast that sales in 2018 would total around 80,000 by the end of December, down 23 per cent from a year ago, but would then rise in 2019 by around 12 per cent to total 89,500 home sales across B.C.

Cameron Muir, BCREA’s chief economist, said, “Continuing strong performance in the economy combined with favourable demographics is expected to push home sales above their 10-year average in 2019.”

General consensus: With one group predicting a notable recovery, one a further dip and two a slight increase, perhaps we will see B.C. home sales largely remain at subdued 2018 levels through this coming year.

Home prices – B.C. and urban centres

The Canadian Real Estate Association is pegging the average sale price of a B.C. home in 2019 at $720,000 – a rise of 0.9 per cent over 2018’s figure. That’s following a year-over-year increase of 0.6 per cent in 2018 to $713,700 – despite slow sales activity.

Central 1’s forecast looked at median prices rather than averages, and said it expected the median provincial resale price to fall two per cent (or around $10,000) in 2019 to $520,000 but then see a slight increase in 2020. The credit union stressed in its forecast that no price crash was forecast.

Looking at Vancouver Island, Yu said, “I think the market in Victoria and the rest of the Island is still quite solid. But prices have essentially flat-lined.” In the capital region, median resale prices are expected to edge up in 2019 by 0.3 per cent from this year to $588,000 (following a 6.1 per cent annual increase in 2018).

However, prices are expected to rise in Island communities that are attracting retirees, Yu said. Overall on Vancouver Island, Central 1 expects the median residential resale price is set to increase next year to $465,000, up 2.2 per cent from 2018, the report predicted.

For Metro Vancouver, Central 1 had a different prediction. “The expectation is that we will see about a few per cent drop-off, which will bring us down to $1.2 million. It’s still very high for a lot of households, for many it will be out of reach,” said Yu. “But we will also see a decline in the condo market, which is clearly looking at higher supply levels.”

The RE/MAX 2019 Housing Market Outlook similarly predicted that Metro Vancouver’s  average home sale price would see a drop of three per cent in 2019 compared with 2018, due to the “low absorption rate.” This, said the brokerage, will follow a slight increase in the average home sale price across 2018 of two per cent, compared with 2017, to $1,049,362. A subsequent three per cent decline in 2019 would take that average price down to $1,017,881, which is slightly lower than 2017’s average price but still well above 2016 prices.

The Royal LePage Market Survey Forecast predicted that the median aggregate price of a home in Greater Vancouver would remain fairly level next year, rising a modest 0.6 per cent in 2019 compared with 2018, to $1,291,144.

Randy Ryalls, broker and manager of Royal LePage Sterling Realty, said, “The [mortgage] stress test, coupled with provincial tax policies, will continue to affect the real estate market in 2019. The possibility of rising interest rates will also keep some potential buyers on the sidelines as they wait to see how higher rates impact the market. For potential buyers whose purchasing ability is not limited through mortgage regulation or financing, the buying opportunities in Vancouver are excellent.”

RE/MAX also looked at Kelowna’s real estate market, and predicted that, following a six per cent annual increase in average prices in 2018, home values would shed half those gains in 2019. The brokerage predicted a drop of three per cent next year to take the average price just under the $700K mark, but still more than $20K above 2017’s average.

General consensus: Provincial average home prices flatlining, with no crash ahead; some slight declines in capital region and Metro Vancouver, which will recover later.

Housing construction

Central 1's Yu said that builders have noted the market slowdown and the result is a sharp drop in housing starts since September, especially in urban areas. Starts in B.C. are predicted to fall to about 32,000 units in each of the next two years after nearly 40,000 units were under construction in 2018 and 43,500 in 2017.

But the credit union’s update also predicts positive housing market outlooks in some areas including Vancouver Island, where retirees fuel the market. Casey Edge, executive director of the Victoria Residential Builders Association, said builders remain optimistic about the capital region, despite what appears to be a slight softening of the real estate market.

He said construction continues to be driven by strong migration from elsewhere in B.C. and across Canada by retirees or people attracted by the region’s robust and diverse economy – and that there are no signs that will change in 2019.

Starts are also predicted to rise in northern B.C. as demand is boosted by a liquefied natural gas project and associated pipelines. As work ramps up on the $40 billion LNG Canada project in and around Kitimat, Central 1 says housing markets in the north are forecast to outperform those in southern B.C., which were hit the hardest this year.

The CMHC forecast for B.C. agrees with that of Central 1. Following a few years of frenzied construction activity, it said, “Housing starts are anticipated to soften going into 2019 through to 2020, moving back towards the 10-year average pace of new construction.”

General consensus: Comparatively weak market will cause developers and builders to pull back on new home construction over next two years.

Rental market

On the rental market, Central 1 Credit Union had this to say: “[B.C.’s] rental market conditions are forecast to remain tight. The apartment vacancy rate holds near 1.3 per cent from 2019 through 2021 as renters find greater difficulty shifting into homeownership given tighter credit conditions and rental demand remains strong due to moderate economic and population inflows. Rent growth is forecast to remain near 5 per cent annually, held back by restrictive rent control measures... For units turned over, rent growth will be much higher as landlords can charge market rents, which will continue to soar given low vacancy rates.”

The CMHC also predicted the next two years for the rental market in Metro Vancouver, which is currently standing at a one per cent vacancy rate. Its report said, “The rental market is expected to remain tight across the region, average rents will continue increasing faster than inflation. The vacancy rate is expected to rise slightly; however, it will remain low in absolute terms, reflecting the strong demand for rental housing in the region.”

General consensus: Slight, if any, easing of vacancy rates; average rents rising well above inflation despite rent control measures.

Source: Joannah Connolly: Glacier Media Real Estate

 

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Vancouver home prices fall most since 2008, extending decline
Dec 17, 2018

Home prices in Vancouver fell 1.9 per cent in November from a month earlier, the most in a decade, extending a recent run of declines for Canada’s most expensive real estate market.

The figures suggest momentum earlier this year may have been just a blip, as consumers adjust to tougher federal mortgage qualification rules. After rebounding to a record in May, prices nationwide have dropped for six straight months, the Canadian Real Estate Association reported Monday, and are hovering at levels little changed from mid-2017, when interest rates started to rise.

“The decline in home ownership affordability caused by this year’s new mortgage stress-test remains very much in evidence,” said Gregory Klump, CREA’s Chief Economist. “While national home sales were anticipated to recover in the wake of a large drop in activity earlier this year due to the introduction of the stress-test, the rebound appears to have run its course.”

From a year earlier, prices fell 1.4 per cent to $1.04 million, CREA reported. That was the first year-over-year decline in five years, and it slowed the nationwide price increase to 2 per cent. Toronto benchmark prices advanced 2.7 per cent.

Nationwide, home resales declined 2.3 per cent in November from the previous month, the most since April, and are down 13 per cent from a year earlier.

The realtor group also now forecasts sales to fall 0.5 per cent next year. That compares with a September prediction that sales would increase by 2.1 per cent.

Source: Greg Quinn: Bloomberg News

Many Metro Vancouverites describe real estate sector as corrupt
Dec 17, 2018

Residents of Metro Vancouver do not have much faith in the integrity of the real estate industry, according to the results of a new Western Canadian poll on public perception of corruption.

Transparency International Canada this week published a wide-ranging survey on perception of corruption across all levels of government and across various business sectors.

According to the survey, 37 per cent of respondents in the Metro Vancouver area agree with the statement that the real estate sector is “extremely corrupt” – this compares with just 15 per cent of Western Canadian respondents outside Metro Vancouver who agree with this statement.

Transparency International Canada said in its report, “For years, real estate has been a dominant issue in Vancouver-area politics, with high housing prices a major public concern. These prices created lucrative opportunities for unethical conduct by real estate agents with conflicts of interest representing both buyers and sellers, enabled by lax and ineffective regulation, and a lack of transparency. While these practices have led to new rules and government regulation, allegations of conflicts of interest continue to be made against Vancouver politicians and the real estate industry. Reports have also made connections between foreign drug dealers, money laundering through B.C. casinos, and investment of laundered money in real estate.”

According to a report by CBC, B.C. Attorney General David Eby addressed the findings at a keynote speech December 13 in Vancouver for Transparency International Canada. “Money laundering has been ignored for too long and it is hurting our communities,” he said. “Our government is fighting money laundering on several fronts, including casinos and real estate, and its ties to organized crime, gang activity and violence.”

Eby has commissioned Dr Peter German, as well as striking an additional expert panel task force, to investigate the issue of so-called “dirty money” in B.C. real estate and other sectors. Both are due to issue their reports in March 2019.

Source: Joannah Connolly: VIA

Vancouver council votes to scrap school tax
Dec 13, 2018

VANCOUVER (NEWS 1130) – It’s the latest push-back against the province’s school tax, which would affect homes worth more than $3 million.

Vancouver City Council voted to ask the B.C. NDP to rethink the 0.2 per cent tax, which is supposed to go into effect next year. Wednesday morning, dozens of protesters filled council chambers, rallying against the tax and called the tax discriminatory because it targets a select group of people.

Green Coun. Pete Fry says the tax doesn’t actually making life more affordable in Vancouver. He says it doesn’t boost affordability as it targets homes worth more than $3 million.

“A lot of folks that have living in homes that they’ve been in for a while and they’ve seen a significant increase in the valuation of their land, land values have gone up to a point where suddenly they’re in a different tax bracket that may not be reflective of their income.”

It’s also another tax on top of others homeowner in Vancouver are already facing.

“Hydro rates are going up, gas rates will be going up,” he says. “A ‘death by a thousand cuts’ notion that are coming to Vancouver taxpayers. We are cognizant of that.”

He also adds that isn’t enough time to really break down the impacts of the tax.

“This represents a pretty big chunk of taxation being levelled on real property in the City of Vancouver, but then it leaves the City of Vancouver … and at the same time, we’re getting a lot of downloading of cost of services,” he says.

Mayor Kennedy Stewart will now write to the provincial government asking them to official withdraw the tax.

Source: Taran Parmar: News1130

B.C. homeowners can expect a mixed bag of property values for 2019
Dec 07, 2018

B.C. homeowners will see overall “signs of moderation” in their upcoming property assessments, with some parts of the province seeing declines and others considerable increases, according to B.C. Assessment.

The property assessment organization said that many of Metro Vancouver’s detached homes have declined in value by five to 10 per cent over the past year. However, this is balanced out provincially by property value jumps in most of the rest of B.C.

Photo by Dan Toulgoet

“It’s a real mix in property value changes, but the market can best be summed up as showing signs of stability across most areas of the province,” said assessor Tina Ireland. “Changes in property assessments really depend on where you live. For example, assessed values for detached single family homes in many areas of Metro Vancouver may see a softening in value, while other markets and areas of the province will see modest increases over last year’s values.”

The Metro Vancouver areas most affected by detached home value declines are Vancouver, the North Shore, South Surrey, White Rock, South Delta and Richmond. Other parts of the Metro region were “relatively stable or even showing modest increases,” said the report.

B.C. Assessment said that the rest of the province could expect increases of five to 15 per cent for single family home values, including the Fraser Valley, Vancouver Island, Okanagan and Northern B.C. It added, “In many parts of central and northern Vancouver Island, values were increasing closer to 20 per cent. And, in Kitimat, the increases were even greater in response to activity within the resource sector.”

Despite the market slowdown, Metro Vancouver condo values generally increased on an annual basis. Vancouver, the North Shore and Burnaby saw the lowest rises in condo values, but condos in some parts of the eastern Fraser Valley increased by more than 20 per cent. Overall, condos around B.C. typically increased in value by 10 to 20 per cent across most areas.

B.C. Assessment added, “Additional price moderation has been seen later in the year, particularly in Metro Vancouver. However, to make sure property assessments are fair, they are all calculated based on the same date of July 1 every year.”

Ireland added, “When properties similar to your property are sold around July 1, those sales prices are used to calculate your assessed value. Our job is to make sure your assessment is fair and accurate as compared to your neighbours.”

All B.C. property owners will receive their annual property assessment notices in early January 2019.

Source: Joannah Connolly

November Stats
Dec 04, 2018
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December 4, 2018

Metro Vancouver homes sales down across all property types

Home buyer demand remains below long-term historical averages in the Metro Vancouver housing market.

The Real Estate Board of Greater Vancouver (REBGV) reports that residential home sales totalled 1,608 in the region in November 2018, a 42.5 per cent decrease from the 2,795 sales recorded in November 2017, and an 18.2 per cent decrease compared to October 2018 when 1,966 homes sold.

Last month’s sales were 34.7 per cent below the 10-year November sales average and was the lowest sales for the month since 2008.

“Home buyers have been taking a wait-and-see approach for most of 2018. This has allowed the number of homes available for sale in the region to return to more typical historical levels,” Phil Moore, REBGV president said. “This activity is helping home prices edge down, across all property types, from the record highs we’ve experienced over the last year.”

There were 3,461 detached, attached and apartment homes newly listed for sale on the Multiple Listing Service® (MLS®) in Metro Vancouver in November 2018. This represents a 15.8 per cent decrease compared to the 4,109 homes listed in November 2017 and a 29 per cent decrease compared to October 2018 when 4,873 homes were listed.

The total number of homes currently listed for sale on the MLS® system in Metro Vancouver is 12,307, a 40.7 per cent increase compared to November 2017 (8,747) and a 5.2 per cent decrease compared to October 2018 (12,984).

For all property types, the sales-to-active listings ratio for November 2018 is 13.1 per cent. By property type, the ratio is 8.9 per cent for detached homes, 14.7 per cent for townhomes, and 17.6 per cent for apartments.

Generally, analysts say that downward pressure on home prices occurs when the ratio dips below the 12 per cent mark for a sustained period, while home prices often experience upward pressure when it surpasses 20 per cent over several months.

“Home prices have declined between four and seven per cent over the last six months depending on property type. We’ll watch conditions in the first quarter of 2019 to see if home buyer demand picks up ahead of the traditionally more active spring market,“ Moore said.

The MLS® Home Price Index composite benchmark price for all residential properties in Metro Vancouver is currently $1,042,100. This represents a 1.4 per cent decrease over November 2017 and a 1.9 per cent decrease compared to October 2018.

Detached home sales in November 2018 reached 516, a 38.6 per cent decrease from the 841 detached sales recorded in November 2017. The benchmark price for detached homes is $1,500,100. This represents a 6.5 per cent decrease from November 2017 and a 1.6 per cent decrease compared to October 2018.

Apartment home sales reached 810 in November 2018, a 46.3 per cent decrease compared to the 1,508 sales in November 2017. The benchmark price of an apartment property is $667,800. This represents a 2.3 per cent increase from November 2017 and a 2.3 per cent decrease compared to October 2018.

Attached home sales in November 2018 totalled 282, a 36.8 per cent decrease compared to the 446 sales in November 2017. The benchmark price of an attached home is $818,500. This represents a 2.6 per cent increase from November 2017 and a 1.3 per cent decrease compared to October 2018.

Click here to download the full package.

Royal LePage winter recreational property survey
Nov 28, 2018

In an effort to provide the media with a seasonal release and build additional content around the Royal LePage brand and network, theRoyal LePage Winter Recreational Properties Survey was released to media early this morning. The survey includes median prices for some of the most popular winter recreational real estate markets in Canada, and more particularly those near ski mountains, from Whistler (BC) to Mont-Tremblant (QC), Canmore (AB) and Collingwood (ON), to name only a few.

Key highlights from the national release include:

  • According to Royal LePage, prices in many key winter recreational real estate markets are experiencing healthy year-over-year price appreciation, as retirees, investors and buyers looking for winter getaways continue to spur demand
  • Whistler and Mont-Tremblant (Station) median condo prices surge over 20%
  • Quebec's healthy economy and strong consumer confidence result in price gains for the majority of markets studied in the region
  • Collingwood's healthy home price gains reflect continued strong demand from buyers in Ontario's Golden Horseshoe

Source: Royal LePage

Vacancy control could be the "death knell" for for 12,000 new rental units
Nov 22, 2018

More than 12,000 new rental units under development would be at risk of cancellation if the oft-mooted “vacancy control” mechanism were to be implemented, according to a new Urban Development Institute (UDI) survey released November 21.

Photo Dan Toulgoet

Vacancy control is a form of rent control that is linked to a unit rather than a tenant – meaning that the landlord would be restricted in the amount they could raise the rent between tenancies. As of 2019, rent control has been capped at the inflation rate, set at 2.5 per cent, which means B.C. landlords can only raise rents by 2.5 per cent for sitting tenants.

However, currently landlords may raise the rent by however much they wish between rental leases, which has prompted calls for a vacancy control system tying rental increase caps to the unit. Tenants’ right advocates such as Vancouver’s COPE councllor Jean Swanson have argued that vacancy control is essential to prevent renovictions and stop landlords jacking up rents between tenancies. Such concerns are being heard by the B.C. Rental Housing Taskforce, which is set to release its next set of recommended changes to the Tenancy Act on November 30. The possibility of imminent changes prompted the UDI to survey its members on the outcome of a vacancy control.

The UDI found that thirty of B.C.’s major rental home builders were strongly against the introduction of “vacancy control” over fears that would make building new projects unviable, and therefore dramatically reduce supply. With respondents reporting 19,972 rental homes currently in development, the survey found that 12,631 of those would be at risk of delay or outright cancellation if vacancy control were implemented. This would reduce the already low vacancy rate, said the UDI, which is below one per cent in a number of communities across the province.

“British Columbians desperately need more rental homes,” said Anne McMullin, UDI Pacific Region president and CEO. “Rental home builders agreed that vacancy control would be the death knell for rental home construction. This is not the time for new restrictions that could result in the cancellation of important rental home projects in communities across British Columbia.”

In addition to making new projects financially unviable, a vacancy control that restricts rental price uplift between tenancies could result in units and buildings not being maintained properly, according to the UDI. McMullin added, “If strict limits are placed on rent, building owners simply won’t be able to afford upgraded elevators, new appliances or replaced carpets. Buildings will fall into disrepair and that’s not what British Columbians deserve.”

Rental housing needed in emerging areas

The survey release comes on opening day of the new 146-unit rental building FUSION in Surrey, which is Surrey’s first purpose-built rental building in more than 30 years. Janai York, sales and marketing director at developer WestStone Group, said that new purpose-built rental housing is needed now more than ever.

York told Glacier Media, “Particularly in emerging areas, like in Surrey’s technology district where FUSION is, there’s a lot of companies moving in and offering jobs, and a lot of people moving in from outside the area. They might not want to buy right away and you have to supply a rental option. At FUSION we have people who are moving from the Prairies and from back east who are RCMP officers and nurses taking local jobs.”

York said that new rental projects depend on being financially viable through the life of the building. “As a developer, we always look at the viability of a project to assess what type of project it will be, whether mixed-use, rental or market condos. When we start looking at the long-term impact of not being able to keep up with the costs of maintenance, suddenly the viability of doing rentals changes, because it’s much riskier. So then you have to decide perhaps not to do that, perhaps do a for-sale-to-market building instead. We have to take all of those things into consideration.”

The UDI survey also asked its members what other factors are inhibiting the building of new rental apartments. Responses included rapidly rising construction costs, increasing interest rates and taxes, and lengthy municipal approval processes.

Dr. Andrey Pavlov, finance professor at Simon Fraser University’s Beedie School of Business, said, “We need to remove the countless government barriers to increasing supply. Rent controls feel good for the moment, but hurt everyone, including renters, in the long-term.”

Source: Joannah Connolly

 

Canada's housing market shows increasing signs of soft landing
Nov 15, 2018

Canada’s once-lofty housing market is achieving a best-case soft landing for policy makers trying to cool things down without triggering a collapse.

The latest string of data indicates the market is experiencing only a modest adjustment in prices in the face of higher interest rates and tougher regulations brought in to tackle a boom that saw values more than double in Toronto and Vancouver since 2009.

It’s a Goldilocks scenario that reduces risk in what had become the economy’s main vulnerability -- an impressive achievement only a year after the country suffered a crisis of investor confidence because of debt and housing worries.

“It’s a pretty good spot to be in, avoiding boom but avoiding bust as well,” Eric Lascelles, chief economist at Royal Bank of Canada Global Asset Management in Toronto, said in a phone interview Thursday. “The rule changes that have been made have been effective in cooling these markets down.”

Canada’s housing boom appears to have come to an end in the middle of last year, following an eight-year ascent that saw national home prices rise by nearly 80 percent. Since then, they’ve been little changed even as market transactions have fallen sharply.

To be sure, risks remain. Young home buyers have never faced anything other than historically low mortgage rates and many will have to refinance over the next few years, while policy makers remain concerned about a cluster of highly indebted borrowers.

Growing signs of a sustainable housing market allow the Bank of Canada to keep moving ahead with modest interest-rate increases in an economy that’s otherwise at full capacity. Government officials can also hold back on new interventions that could spook households.

“It looks like we’re settling into this environment in Canada where price growth is going to be flat in real terms,” something that hasn’t happened outside of a recession since the 1990s, Bank of Montreal Senior Economist Robert Kavcic said by phone from Toronto.

Prices and sales showed modest gains or losses for October in reports Thursday from the Canadian Real Estate Association and from the Teranet land registry. That’s a switch from most of the last year where they swung in response to tougher mortgage qualification rules and the first interest-rate hiking cycle from the central bank in almost a decade.

‘Medicine Is Working’

Home sales held close to their 10-year average after falling for a second month in October, the realtor group said. Benchmark prices rose 2.3 per cent from a year earlier, and gains in Vancouver and Toronto were close to the national average.

Canada would stand out if it comes through its housing boom without a crash like those seen in the U.S., the U.K. or Spain. “Overall, yes the medicine is working,” Benjamin Tal, deputy chief economist at the Canadian Imperial Bank of Commerce, said in a phone interview.

“We are reaching some sort of landing, how soft it will be I don’t know, but we aren’t in a free-fall by any stretch of the imagination,” Tal said.

Even with the latest figures showing stability, it could take years to unwind the imbalances that have built up. The rise of the million-dollar home in some of Canada’s biggest cities has also created affordability challenges for buyers as builders struggle to offer new supply.

“Its absolutely fair to say the Canadian housing market is off the boil,” Lascelles said, adding a note of caution: “There is no pre-ordained conclusion here.”

Source: Greg Quinn; bloomberg News--With assistance from Erik Hertzberg.

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