This weeks top stories include how household debt in Canada has reached a new high of 163% of disposable income, how sales in Vancouver and B.C. continue to affect the national sales average, how the Bank of Canada Governor Mark Carney left some things out of his statements in Manitoba this week, how U.S. housing starts have increased to the highest level in four years, how condo sales in the Greater Toronto Area have declined as price growth become stagnant, how the commercial market in Canada continues to show strength and how the Toronto condo sector will be tested with three new projects being launched in the next two weeks.
According to the latest figures released by Statistics Canada, it seems that Canadian households are more in debt than previously figured. The agency recently revised national balance sheets and found that the household credit market debt in the second quarter (Q2) of this year had reached 163% of disposable income.
This figure is much larger than the previously reported 152% of disposable income. This is the same figure reached by the U.S. and the U.K. before they witnessed home prices crash. Statistics Canada revised their number by taking non-profit institutions out of the category, leaving a more accurate reading on the state of Canadian household debt and finances. Some good news came out of the revision as the agency noted that Canadians have more assets than previously thought. There was an increase in per captia net worth with rises from $7,900 to $190,200.
Diana Petramala, TD bank economist was noted as saying that the results point to Canadian households being more vulnerable to a housing correction than previously thought. This is mainly on the basis that Canadians hold more assets than those in the U.S. and U.K. before their crash and that most of these assets are locked in to the value of their homes, which could lead to a substantial loss if the housing market, or economy, when housing goes through its correction. What do you think? Please comment below.
There has been a slight recovery from the month of August in the home sales across Canada but this did not stop September sales from falling 15.1% from the same time last year. According to the Canadian Real Estate Association (CREA), tighter mortgage lending guidelines and increased uncertainty in the Canadian economy have continued a downward trend on sales figures.
Sales may have been up 2.5% from August’s slump, which is the first month to month gain since March of this year, but compared to last year September, sales across Canada were down substantially in large part to the slump witnessed in Vancouver. Gregory Kump CREA’s chief economist was noted as saying, “National activity is likely to remain down from year-ago levels over the fourth quarter of 2012. While some first time home buyers may no longer qualify for mortgage financing under the new rules, it is likely that many others are stepping back and reassessing how much house they can realistically afford, which is one of the things new mortgage rules were designed to do.”
TD Bank economist Francis Fong commented, “The Canadian housing market has clearly lost some of its luster. That being said, with interest rates remaining sufficiently accommodative, we do not anticipate any precipitous decline in housing activity in the near term. Rather, we expect a gradual unwinding of the imbalance in both sales and prices over the next few years.” The Canadian Real Estate Association (CREA) continues to state that there is a good balance between the number of active listings and the number of active buyers but that market conditions have eased. What do you think? Please comment below.
Bank of Canada (BoC) Governor Mark Carney shared his thoughts about next weeks release of the quarterly economic forecast and pointed to a prolonged global recovery. He noted that he may reduce his outlook and delay raising interest rates further than expected. The new forecast will look at the impact of uncertainty in the world markets.
October 23rd is the next interest rate decision meeting with Canada’s overnight lending rate from the BoC currently at 1% for the last two years. This is the longest period in history since the 1950s that the rate has been left unchanged. TD Bank economist Francis Fong was noted as saying, “I would expect slight downgrades in their forecasts. Their bias I suspect would remain in a wait-and-see approach.” Scotia Bank economist Derek Holt commented, “Gone will be the hawkish paragraph pointing to hikes at some point. It is fairly clear that BoC Governor Mark Carney is priming markets for a forecast rewrite and a more neutral to dovish bias.”
The BoC might be pointing in a direction to remove monetary stimulus policies but we won’t know until the release next week. Interest rate hike expectations are now going out the window but I think an interest rate cut is also not in the cards. Global concern continues to affect domestic activity and a prolonged period of a low interest rate environment has caused many Canadian consumers to take advantage of cheap money and over borrow. Canadian businesses have cut expectations for sales growth and are curbing thoughts of investment and hiring in the short term. We will have to wait and see what happens next. What do you think will happened? Please comment below.
It seems that the U.S. housing market may be on a rebound as construction on single family homes and apartments, in the month of September, increased at the fastest pace in four years. We have not seen this much activity in U.S. housing construction since July of 2008. This adds to the notion that the U.S. housing recovery may be fully underway.
The U.S. Commerce Department noted on Wednesday of this week that builders had broke ground on homes at a seasonally adjusted annual rate of 872,000 units in the month of September, which is an increase of 15% from the previous month. Applications for building permits were up almost 12% to an annual rate of 894,000, ,which is also the highest level in four years and is a good sign of future construction. The increase in the month of September came in both the single family and apartment sector which increased 11% and 25.1% respectively. Construction is currently 82.5% higher than the lows reached during the recession in April of 2009.
Even with the increase in figures, activity is still significantly below the 1.5 million rate that makes a healthy market. Regardless, the increased construction and application for permits can lead many to believe that the housing rebound is durable this time around. Builder confidence as also increased and reached a six year high this month. The National Association of Home Builders group index of builder sentiment increased to a reading of 41. That number is still below the level of 50, which signals a healthy market but has steadily increased in the past year. What do you think? Please comment below.
The condo market has begun to cool in the Greater Toronto Area (GTA) with resale condo transactions dropping 20.5% in the third quarter (Q3) of this year. Prices are now expected to remain flat through next year being attributed to the condo boom, according to the Toronto Real Estate Board (TREB). Sales via MLS have also declined with new listings up more than 6.5% when compared to Q3 of last year with new buildings finalizing construction and pre-construction units coming on to the market from buyers not looking to close but rather assign their units.
Stricter mortgage guidelines imposed by the government have put many buyers out of home ownerships reach, stated TREB in a recent report on the Toronto condo market that was released on Tuesday of this week. The average price of a resale condo in the GTA during Q3 of this year had reached $334,204. Condo’s located in the Toronto core had a premium and averaged $357,030 according to TREB. The increase is only $2000 more than the price that the same unit sold for in Q3 of last year, which means prices have also flat lined in the condo sector.
Investors are also having difficulty renting units as there is more competition with more buildings being finished in Toronto as of recently. Rental listings had increased 18.2% in Q3 of this year when compared to the same period in 2011 but the number of leased units were only up 3.3%. Jason Merson, senior manager of market analysis for TREB commented, “Prospective renters had more units to choose from, which led to less upward pressure on rents. Given the supply of listings currently in the market place, the average rate of price growth for condo apartments should continue to lag price growth for low-rise home types over the next year.” What do you think? Please comment below.
The commercial real estate sector in Canada remained strong for the first half of 2012 and is expected to be strong well into next year, according to a new study released by Re/Max realty this week on Wednesday. Almost all markets in across Canada witnessed an increase in commercial sales numbers and dollar volume for the first half of this year.
The report tracked nine Canadian centers including Calgary, Edmonton, greater Vancouver, Winnipeg, Regina, London, the greater Toronto area, Halifax-Dartmouth and Ottawa. The positive news came on the heels of negative news from the Canadian Real Estate Association (CREA) that the residential market is slowing and cooling quickly. CREA stated that sales were down 15.1% from the same time last year and will remain low for the fourth quarter (Q4) of this year. They are attributing the down turn to tighter mortgage lending guidelines and a weak and uncertain economy.
CREA commented, “While some first-time home buyers may no longer qualify for mortgage financing under the new rules, it is likely that many others are stepping back and reassessing how much house they can realistically afford, which is one of the things new mortgage rules were designed to do.” Re/Max executive vice president Gurinder Sandhu commented, “Canada’s commercial market has quickly shaken off the signs of recessionary sluggishness and roared back to life, with 2012 building on impressive gains reported in 2011. With little product available in the market, upward pressure on pricing is expected to continue for the remainder of the year and into 2013. Low interest rates and volatility in the stock market has increased demand for commercial real estate. What do you think? Please comment below.
The next two weeks will see a flurry of activity for the condo sector as three new condo developments launch. This will be a test to see where the condo market is really at today as sales numbers have been on a drastic decline year over year. The tallest buildings to hit Toronto’s waterfront will be put into the sales lime light with developers looking for a reading of the current state of the Toronto condo market.
Tridel will launch sales of its Ten York project on Saturday, which was originally marked to be 75 storeys but was cut down to 65 storeys due to issues with the size of the site and an outcry that the building was too high for the location. Two weeks later, the title of highest building will be overtaken by Empire Communities as they launch Eau du Soleil on the Etobicoke waterfront with two towers slated to be 66 and 44 storeys with 1250 suites. Shortly after we will see the King Blue project launch sales for their 44 and 48 storey towers with 800 units planned for Peter and King Street in the downtown entertainment district.
These launches usually take place in the spring but developers are looking to get a jump start to try and gauge market sentiment for active condo buyers. Last year witnessed 28,190 condo sales and was noted to be the best sales record in history. Tridel vice president Jim Ritchie commented, “We’ve spent a tremendous amount of time reviewing this project, looking at the numbers and making sure we have it right. There is obviously a segment of the marketplace that thinks this is not a good time to buy, but we believe we’ve found enough (buyers) who have a longer-term vision. Even if there are ups and downs in the Toronto market in the short term, these units won’t be up for five years. This is building for the future.” What do you think? Please comment below.
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