CMHC to issue first-ever ‘red’ warning for Canadian housing market: What that means for you

Canadian Mortgage and Housing Corporation CEO Evan Siddall said in an op-ed in the Globe and Mail this week that for the first time ever, the federal agency will be issuing a “red” level warning for the entire Canadian housing market.

The announcement will come in CMHC’s quarterly Housing Market Assessment on Oct. 26.

According to CMHC, a “red” warning indicates evidence of problematic conditions in the housing market. To assess the risk, the agency looks at four things:

Overheating of demand, where sales outpace new listings
-Acceleration of house prices
-Overvaluation in house prices, where prices are not fully supported by income, mortgage rates and population
-Overbuilding

These factors have to be strong in order for a high-risk warning to be issued.

But according to TD economist Diana Petramala, home owners shouldn’t be too worried yet about a housing crash.

“It’s very odd to be coming out with a red reading now that the economy is doing well and market activity has slowed,” she said.

http://globalnews.ca/news/3018605/cmhc-to-issue-first-ever-red-warning-for-canadian-housing-market-what-that-means-for-you/

Toronto Market Watch: September 2013

Greater Toronto Area REALTORS® reported 7,411 residential sales through the TorontoMLS system in September 2013, representing a 30 per cent increase compared to 5,687 transactions reported in September 2012. Year-to-date, total residential sales reported through TorontoMLS amounted to 68,907 during the first nine months of 2013 – down by one per cent compared to the same period in 2012.

“It’s great news that households have found that the costs of home ownership, including mortgage payments, remain affordable. This is why the third quarter was characterized by renewed growth in home sales in the GTA. We expect to see sales up for the remainder of 2013, as the pent-up demand that resulted from stricter mortgage lending guidelines continues to be satisfied,” said Toronto Real Estate Board President Dianne Usher.

The average selling price for September transactions was $533,797 – up by 6.5 per cent year-over-year. Through the first three quarters of 2013, the average selling price was $520,118 – up by over four per cent compared to the first nine months of 2012.

The MLS® Home Price Index composite benchmark for September was up by four per cent year-over-year. The annual rate of growth for the composite benchmark has been accelerating since the spring of 2013.

“The price growth story in September continued to be about strong demand for low-rise home types, coupled with a short supply of listings. Even with slower price growth and month-to-month volatility in the condo apartment market, overall annual price growth has been well above the rate of inflation this year. This scenario will continue to play out through the remainder of 2013,” said Jason Mercer, TREB’s Senior Manager of Market Analysis.

How Will Blackberry News Effect Real Estate in Waterloo Region?

On Tuesday, September 23, Blackberry officially announced that Fairfax Financial consortium signed a $4.7 billion deal to purchase the struggling tech company. Just days after announcing a loss of nearly $1 billion, the company also announced impending lay-offs of close to 40% of its workforce. 

Locally, many are speculating as to just how deep the impact of Blackberry’s misfortunes will go. Since its inception in 1984, the Waterloo-based firm has become the largest occupier of office space in Waterloo Region. Currently holding a regional inventory of 1.6 million square feet of office space, Blackberry comprises nearly 15% of the total office market. At one time, the company was the single largest driver of office construction in the region, leading many to wonder how a potential influx of office space could affect market dynamics. Karl Innanen, Managing Director with Colliers International Waterloo Region, commented, “Blackberry has always been a very big fish in a relatively small pond; however, there are extremely successful companies in Waterloo Region that need more space and have been overshadowed in recent years. The real estate component could be an opportunity.” As Blackberry has steadily declined over the past two years, some of its real estate has already come to market and been quickly absorbed. Given current trends in the Waterloo Region market, the possibility also exists that any Blackberry space brought to market would be developed into higher and better uses - removing it from office inventory altogether.

Waterloo Region has benefited greatly from Blackberry’s success over the past three decades, and it is expected that the highly diversified industry in Waterloo Region, and in particular, the flourishing tech sector, will be able to bear the weight of Blackberry’s losses. After years of competing for the best and brightest minds, companies such as Desire2Learn and OpenText will now have access to an experienced pool of talented employees seeking new opportunities. Innanen went on to say, “The Region of Waterloo has always been a market of ‘enterprising adaptors’. We have gone through many evolutions, right from the wagon wheel to the Blackberry, so we will make the best of this and determine what the next great product or service is, and work on that.” 

August 2013 Sales and Average Price Up Over 2012

Greater Toronto Area REALTORS® reported 7,569 residential transactions through the TorontoMLS system in August 2013. This represented a 21% increase compared to 6,249 sales in August 2012.

“Sales were up strongly this past August for all major home types compared to last year. Many households have accounted for the added costs brought on by stricter mortgage lending guidelines and have reactivated their search for a home. These households have found that a diversity of affordable ownership options exist throughout the GTA,” said Toronto Real Estate Board President Dianne Usher.

The average selling price for August 2013 was $503,094 – up by almost 5.5% compared to the average of $477,170 in August 2012. The MLS® Home Price Index (HPI) composite benchmark was up by 3.7 per cent over the same period.

“Despite an increase in borrowing costs during the spring and summer, an average priced home in the GTA has remained affordable for a household earning an average income. With this in mind, tight market conditions are expected to promote continued price growth through the remainder of 2013,” said Jason Mercer, TREB’s Senior Manager of Market Analysis.

Strong Sales and Price Growth in July

Greater Toronto Area REALTORS® reported 8,544 residential sales through the TorontoMLS system in July 2013. Total sales were up by 16% compared to July 2012. Over the same period, new listings added to TorontoMLS and active listings at the end of the month were up, but by a substantially smaller rate of increase compared to sales.

“Last month’s sales represented the best July result since 2009 and was the third best July result on record. Despite recent increases in average borrowing costs, home buyers are still finding affordable home ownership options in the GTA,” said Toronto Real Estate Board President Dianne Usher.

“We are a year removed from the onset of stricter mortgage lending guidelines and many households who put their decision to purchase a home on hold have reactivated their search. An increasing number of these households are getting deals done,” continued Ms. Usher.

Reflecting tighter market conditions, the average selling price for July sales was up on a year over-year basis by 8% to $513,246. The low-rise market segment continued to be the driver of overall price growth. It should be noted, however, that the average condominium apartment price was also up by more than the rate of inflation on an annual basis. The MLS® Home Price Index (HPI) was also up on a year-over-year basis for all major home types.

“We are forecasting continued average price growth for the remainder of 2013 and through 2014 as well. Months of inventory for low-rise homes remains near record lows, suggesting that sellers’ market conditions will remain in place in the second half of 2013. An increase in listings in 2014 would lead to more balanced market conditions and a slower pace of price growth next year, albeit still above the rate of inflation,” said Jason Mercer, TREB’s Senior Manager of Market Analysis.

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GTA Sales Are Down But Prices Are Still Going Up in June 2013

Greater Toronto Area REALTORS® reported 9,061 sales through the TorontoMLS system in June 2013 - down by less than 1% compared to June 2012. Over the same period, new listings were down by a greater rate than sales, suggesting market conditions became tighter.

"The sales picture in the GTA improved markedly in the second quarter of 2013. While the number of transactions was still down compared to 2012, rates of decline were substantially improved compared to the first quarter," said Toronto Real Estate Board President Dianne Usher.

"As a growing number of homebuyers, many of whom put their purchase on hold due to stricter lending guidelines, now reactivate their search, the expectation is for renewed growth in home sales in the second half of 2013," added Ms. Usher

The average selling price in June was up by 4.7% year-over-year to $531,374. In line with the 2013 norm, June price growth was driven by the single-detached and semi-detached market segments, particularly in the City of Toronto. Over the same time period, average condominium apartment selling prices remained in line with 2012 levels.

"The short supply of low-rise home types in many parts of the GTA relative to the number of households looking to buy continued to prompt strong upward pressure on selling prices of singles and semis," said Jason Mercer, TREB's Senior Manager of Market Analysis. "We have also seen enough buyers in the better-supplied condo apartment market to provide support for selling prices at current levels.”

Have you though about investing in retail space?

Toronto ranked as the 17th most targeted market for retail expansion in the world according to CBRE’s 2013 edition of How Global is the Business of Retail? CBRE's annual survey maps the global footprint of 320 of the world's top retailers across more than 200 cities and tracks cross-border retailer movements. The report found that retailers expanded into a wide range of markets in 2012 

When comparing new retail entrants by country, Canada tied for 6th overall with 25 new retailers entering the market in 2012. Hong Kong was the world leader with 51 new entrants. An analysis of specific cities revealed that Toronto attracted 15 new entrants into the market enough to rank 17th in the world, on par with Ho Chi Minh City and Moscow. Outside of Toronto, new entrants have been targeting Vancouver, Calgary and Montreal as gateways into the Canadian market.

“Canada remains an attractive destination in a very competitive environment,” said Tom Balkos, Senior Vice President and a Canadian Director of CBRE Limited’s Retailer Services Group. “We spend far more time finding space for major brands than we do convincing them of the need to come to Canada. The fact that Canadian malls are 50 per cent more productive on average than those in the U.S. and that there is less competition in each retail category in Canada has been more than enough to entice retailers to explore Canadian options.”

The report also found that U.S. retailers were the most aggressive by far when expanding store networks globally and they accounted for most of the new entrants into the Canadian market over the past year. Italian, British and French retailers are also highly active, focusing mainly on their own region, although Asia is also a key target for many retailers.

At the sector level, 'Mid-Range' fashion retailers entered more new markets around the world than any other sector last year, accounting for 22% of all new openings, followed by 'Luxury and Business Fashion' retailers (20%). 'Coffee and Restaurants' (13%) is another growth area, as international retailers expand to meet consumer demand for entertainment-based retail. ‘Mid-Range’ fashion retailers were particularly interested in entering the Canadian market. Toronto ranked 4th in the world in 2012 based on its ability to attract new ‘Mid-Range’ fashion retailers and was only bested by Hong Kong, Kiev and London.

Mature markets dominated retailer expansion plans last year, although six emerging markets made the top 20. Paris, London, and New York continue to garnering significant numbers of new entrants, while the top emerging markets included Kiev in second place with 39 new entrants, Sao Paulo (25 new entrants), lasi (19), Muscat (17) and Ho Chi Minh City (15).

One struggle that Canadian cities have in common with many emerging markets is the under supply of quality retail space. This has limited the influx of new retailers into Canada in recent years.

"In general, a lack of new prime retail space globally is limiting the ability of some retailers to meet their expansion plans. This is most notable in mature markets, but also affects many emerging markets where much of the new development is in the peripheral areas of large cities, appealing only to domestic brands. Retailers are also more selective than ever - both in terms of the countries they choose and the type of space they take, with the focus firmly on the best space in the biggest cities,” noted Peter Gold, Head of Cross Border EMEA Retail for CBRE.

A shift is underway in the Canadian retail market, which will allow retailers to enter the country more easily in years to come. A new retail construction cycle is underway which will create new and innovative space for retailers. Landlords are responding to high demand by expanding existing retail centres and building new formats like outlet malls. The national retail inventory will grow by 5.4 million SF in 2013 and new supply is expected to continue to trend above the 5.2 million SF 10-year average going forward. Balkos suggests that new dynamics, especially the churn in the department store sector, are likely to produce the retail availabilities that foreign retailers need to enter and expand in Canada.

“The combination of new construction and rightsizing in the big box category will produce a variety of space opportunities, but it’s going to take a deft hand and understanding of the market to successfully navigate what will be an increasingly dynamic retail environment in Canada,” said Balkos. 

To download a copy of CBRE’s 2013 edition of How Global is the Business of Retail? please click here.

Which are the cheapest and most expensive markets?

Last month a study by the OECD, which compared prices with local wages and rents, suggested Belgium, Norway and Canada were the most expensive markets compared with their own long-term averages, followed by New Zealand, France and Australia (see OECD the chart below).

For cheap property, the research pointed to Portugal, Ireland, Germany and Japan.

It is a bit scary to see both Price-to-Rent and Price-to-income to be so high, making housing not very affordable to most of the people. On another hand this might be a sign of market adjustment coming up.

One thing to remember is that numbers are general for entire country - this is macro economics level. Real Estate market however is always micro economic and there might be markets that are still affordable and good place for investment even when the general market is not

Toronto Market Watch: April 2013

GTA REALTORS® reported 9,811 sales through the TorontoMLS system in April 2013, representing a dip of 2%  in comparison to 10,021 transactions in April 2012. Both new listings during the month and active listings at the end of April were up on a year-over-year basis.

“Despite the headwinds we have experienced in the housing market this year, April sales came in quite strong in comparison to last year. As we move through the spring and into the second half of 2013, the demand for home ownership should continue to firm-up relative to last year,” said Toronto Real Estate Board President Ann Hannah.

“It has been almost a year since the federal government enacted stricter mortgage lending guidelines. It is realistic to surmise that some households, who originally put their decision to purchase on hold, are once again looking to buy,” continued Ms. Hannah.

The average selling price for April 2013 transactions was $526,335 – up by 2% in comparison to April 2012. The MLS® HPI Composite Benchmark Price was up by 2.9%.

“The condominium apartment segment in the City of Toronto was a key driver of price growth in April, with both the average selling price and the MLS HPI apartment index up on a year-over-year basis. The improved condo sales picture, with Toronto sales down by only one per cent compared to last year, suggests that interest in condo ownership may be improving," said Jason Mercer, TREB's Senior Manager of Market Analysis.

Toronto Market Watch: March 2013

GTA REALTORS® reported 7,765 transactions through the TorontoMLS system in March 2013 – down 17% compared to 9,385 transactions in March 2012. 

While the year-over-year dip in March sales followed the trend that has unfolded since mid-way through 2012, it is also important to note that the Good Friday holiday was in March this year versus April in 2012. Generally speaking, there are fewer sales reported on statutory holidays and weekends.

In the first quarter of 2013, sales amounted to 17,678 – down by 14 per cent compared to Q1 2012.

"Home ownership remains affordable for a household earning the average income in the Greater Toronto Area. There are many willing buyers in the marketplace today. While some households have put their decision to purchase on hold as a result of stricter lending guidelines or the additional Land Transfer Tax in the City of Toronto, other households simply haven’t been able to find the right house due to a shortage of listings in some market segments," said Toronto Real Estate Board President Ann Hannah.

The average selling price in March was $519,879 – up by 3.8% compared to March 2012. The average price in Q1 2013 was $508,066 – up by 3.2 per cent compared to the first quarter of 2012.

"The average selling price and the MLS® Home Price Index Composite Benchmark was up on a year-over-year basis across most home types, especially in the low-rise market segments where supply remains an issue. TREB's average price forecast for 2013 remains at $515,000, representing a 3.5 per cent annual rate of growth," said Jason Mercer, TREB's Senior Manager of Market Analysis.

Toronto Market Watch: February 2013

GTA REALTORS® reported 5,759 sales through the TorontoMLS system in February 2013 – a decline of 15 per cent in comparison to February 2012.  It should be noted that 2012 was a leap year with one extra day in February.  A 28 day year-over-year sales comparison resulted in a lesser decline of 10.5 per cent.

The average selling price for February 2013 was $510,580 – up two per cent in comparison to February 2012.

“The share of sales and dollar volume accounted for by luxury detached homes in the City of Toronto was lower this February compared to last.  This contributed to a more modest pace of overall average price growth for the GTA as a whole,” said Toronto Real Estate Board (TREB) President Ann Hannah.

“Stricter mortgage lending guidelines that precluded government backed mortgages on homes sold for over one million dollars and the City of Toronto’s additional upfront land transfer tax arguably played a role in the slower pace of luxury detached home sales,” added Ms. Hannah.

The MLS® HPI Composite Benchmark price covering all major home types eliminates fluctuations in price growth due to changes in sales mix.  The Composite Benchmark price was up by more than three per cent on a year-over-year basis in February.

“We will undoubtedly experience some volatility in price growth for some market segments in 2013.  However, months of inventory in the low-rise market segment will remain low, resulting in average price growth above three per cent for the TREB market area this year.  Our current average price forecast is $515,000 for all home types combined in 2013,” said Jason Mercer, TREB’s Senior Manager of Market Analysis.

Summary of TorontoMLS Sales and Average Price – FEBRUARY 2013
	2013							2012
	Sales		Average Price			New Listings		Sales	Average Price			New Listings
City of Toronto ("416")	2,189		$552,014			4,326		2,617	$552,684			5,125
Rest of GTA ("905")	3,570		$485,174			6,726		4,192	$467,514			7,467
GTA	5,759		$510,580			11,052		6,809	$500,249			12,592
TorontoMLS Sales & Average Price  By Home Type – FEBRUARY 2013
		Sales					Average Price
		416		905	Total		416			905	Total
Detached		749		2,025	2,774		823,329			582,777	647,728
Yr./Yr. % Change		-16.9%		-15.8%	-16.1%		0.1%			3.4%	2.2%
Semi-Detached		234		382	616		618,777			401,981	484,335
Yr./Yr. % Change		-13.3%		-15.9%	-14.9%		6.2%			4.4%	5.6%
Townhouse		230		682	912		450,440			371,640	391,513
Yr./Yr. % Change		-0.4%		-5.9%	-4.6%		4.9%			7.1%	6.7%
Condo Apartment		953		399	1,352		352,614			281,398	331,597
Yr./Yr. % Change		-20.0%		-20.7%	-20.2%		-4.7%			4.3%	-2.5%

Toronto overtakes Chicago as fourth-largest city in North America

Toronto has leap-frogged Chicago to become the fourth-largest city in North America, according to a new report that came before the economic development committee Tuesday.

The latest data from Statistics Canada and the U.S. Census Bureau show Toronto’s population at an estimated 2,791,140, narrowly edging out Chicago, which sits at an estimated 2,707,120. The top three spots go to Mexico City, New York and Los Angeles.

“These population figures are another sign confirming Toronto’s steady growth,” Mayor Rob Ford said in a statement. “Toronto is a desirable location for people to live and work. We are attracting people from across North America and other parts of the world.”

The Economic Dashboard report relied on Statistics Canada’s July 2012 population estimates, released last month, which also revised the city’s 2011 population estimate to add 9,400 people. The latest available U.S. Census Bureau data for Chicago was from 2011.

The population figures refer to the cities proper, rather than their metropolitan areas. When the latter is taken into account, Chicago outstrips Toronto by several million people.

Toronto’s annual population growth rate has risen steadily over the last decade, and the city’s numbers are now increasing by about 38,000 people annually. But while that is overall a positive thing, said Pierre Desrochers, associate professor of economic development at the University of Toronto’s Mississauga campus, the city must seriously consider a host of related problems, from transit to increased housing costs.

“Historically, whether we’re fourth or seventh doesn’t really matter,” Mr. Desrochers said. “What really matters for the future of the GTA is whether we can address the problems that come with that growth.”

He pointed to another list that Toronto tops: that of worst average commute times in North America. Such issues will play a key role in whether Toronto remains an attractive city for newcomers in the years ahead, Mr. Desrochers noted.

Here is what the Economic Dashboard had to say about other elements of the city’s economy:

Population Estimates: Toronto’s population has been increasing over the past 10 years and has yet to stabilize or decrease.

The annual rate of increase is 38,000 people. Although immigration to the city of Toronto has declined, intra-provincial moves and a natural increase in births and deaths are the factors that contribute to the steady upward climb. The population in Toronto has caused a ripple effect in other areas of the economy.

Housing: According to the Economic Dashboard, Toronto real estate is stable and expected to moderate in the years to come.

The Toronto Real Estate board reported a 9% decrease in house sales but a 7% increase in the average price. The report suggests that changes to mortgage insurance rules in July 2012 contributed to the drop in the resale market.

Building: Toronto ranks first in North America, with 184 buildings under construction. The total value of building permits in 2012 — $6.2-billion — was three times higher than it was 10 years ago, but that number is still lower than 2010 and 2011. The number of issued industrial, commercial and instructional permits have decreased since 2011, yet the value of commercial permits have remained unchanged.

Office Market: Toronto’s office market is in the midst of a location tug of war. In the suburbs and cities outside of Toronto, vacancy in office space is rising. The office vacancy rate in the 905 area is now over 10%, the report says, compared to a rate of 4.4% downtown.

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Toronto Market Watch: January 2013

Greater Toronto Area REALTORS® reported 4,375 transactions through the TorontoMLS system in January 2013. This number represented a slight decline compared to 4,432 transactions reported in January 2012.

“The January sales figures represent a good start to 2013. While the number of transactions was down slightly compared to last year, the rate of decline was much less than what was experienced in the second half of 2012. This suggests that some buyers, who put their decision to purchase on hold last year due to stricter mortgage lending guidelines, are once again becoming active in the market,” said Toronto Real Estate Board (TREB) President Ann Hannah.

“It is interesting to note that sales were up for many home types in the GTA regions surrounding the City of Toronto. This is due, at least in part, to the additional upfront land transfer tax in the City of Toronto,” added Ms. Hannah.

The average selling price for January 2013 sales was $482,648 – up by 4.3% compared to $462,655 in January 2012. The MLS® Home Price Index (HPI) Composite Benchmark price was up by 3.8 per cent over the same period.

“There will be enough competition between buyers in the marketplace to prompt continued growth in home prices in 2013. Expect annual average price growth in the three to five per cent range this year,” said Jason Mercer, TREB’s Senior Manager of Market Analysis.

Condo market continues to be down in both sales ( - 5.1%) and price ( - 1.2%). All other property types discovered price increase, though number of sales of townhouses in Toronto experienced the larges drop in number of sales ( - 11.2%) which might be due to the fact that price is now over $400K

Number of active listings continues to stay higher that a year ago and days on the market are 5 days more now than in 2012

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What if market correction is around the corner?

New 2013 Year is upon us and we all want to know what is going to happen on the Real Estate market in Canada. In my opinion, no one can predict with 100% certainty where Real Estate prices will go in the future. Even the educated ‘experts’ can’t get it right… and they are always offering conflicting predictions.What if market correction is around the corner? Is it good or bad? 

First Time Home buyers 
If you’re a first time home buyer, a slight market correction would be welcome news for you. For now you can still get into home ownership with only 5% down, but since your maximum amortization is now limited to only 25 years, a drop in pricing is exactly what you’ll need to be able to get into this market. Plus in a better market, you would most likely have much more competition for the same house.
Conclusion: A market correction is a good thing for you. 

Current Home Owner - Moving Up or Downsizing
If you are a home owner and you’re looking for the right time to sell your house so you can buy another, you may be concerned that the price of your current home is dropping. But let’s take a closer look at that:Whether upsizing or downsizing, the key to remember in a downturn market is that the person selling their home to you is going through the exact same thing. In other words, if the value of your home dropped 10% so too did the value of the new home you are buying.In fact if you are upsizing you are most likely in a better position because more expensive homes drop in price faster, so you are likely to loose 10% on the sale of your smaller home but gain 15-20% priced reduction on the new bigger house.
Conclusion: In most cases out there, the net effect of a market correction is zero or in your favour. 

Real Estate Investor or Second Home Buyer
If you are buying Real Estate as an investment or as a second home, then this is the perfect market condition for you. When there are more sellers than buyers you have more room for negotiation. Also with the extremely high cost of property, it is difficult to find income properties that will cash flow without a substantial down payment.

Also if more people are selling, more people are moving into rent. Therefore, more clients for you, making your investment more profitable and easier to get a mortgage (with higher rental income)
Conclusion: You should be hoping for a market correction.

Current Home Owner With No Plans To Sell 
If the value of your house were to drop by 10% tomorrow, it would only be on paper unless you sold your house tomorrow. Since you have no intention of selling soon and you can still afford your monthly payments, it would be no impact on you. The truth is that Toronto area is a great place to live, work and play. In an established area with a good public-school district will hold its value.
Conclusion: A market correction may very well have no impact zero you.

Bottom line … market correction is not such a bad thing for most of us. Neither is continuing price growth, which we all enjoyed in the last few years. So whatever happens in 2013 take advantage of it and enjoy the New Year.