Annual pace of housing starts hits highest level since September 2007

Craig Wong, The Canadian Press
Published Monday, April 10, 2017 9:21AM EDT
Last Updated Monday, April 10, 2017 10:51AM EDT

OTTAWA -- The number of new homes that began construction in Canada last month hit their highest level since September 2007, the latest sign of a boom in the housing market that many fear is overheating.

The seasonally adjusted annual rate of housing starts for March came in at 253,720 units, up from 214,253 in February, Canada Mortgage and Housing Corp. said Monday.

Economists had expected a reading of 215,000 for last month, according to Thomson Reuters.

In Toronto, where concerns of a housing bubble are most pronounced, the annual pace of housing starts was 53,021, up from 36,389 the month before.

"The supply response in Toronto is particularly welcome, given the white-hot pace of price growth and dearth of inventory on the market," said TD Bank senior economist Michael Dolega in a research note.

"The completion of these units should help take some steam out of Toronto's home price growth, although this won't happen overnight and is likely a story for next year and beyond."

The gain in national housing starts helped push CMHC's trend measure, a six-month moving average of the monthly seasonally adjusted annual rate, to 211,342 units in March, up from 205,521 in February.

The annual pace of urban starts increased by 20.2 per cent to 235,674 units, boosted by an increase in multi-unit starts.

Multi-unit urban starts increased by 30.2 per cent to 160,989, while single-detached urban starts increased by 3.1 per cent to 74,685 units. Rural starts were estimated at a seasonally adjusted annual rate of 18,046.

A lack of supply has been one factor some have pointed to as a reason for the recent surge in Toronto home prices.

Politicians have faced calls in recent months to address soaring home prices in the city amid worries the market is in a bubble. The average selling price in the Greater Toronto Area in March was up by roughly a third compared with a year ago.

Ontario Finance Minister Charles Sousa has promised housing affordability measures in the upcoming budget, raising the possibility of a tax on foreign investors, speculators or vacant homes.

Both a vacant homes tax and a foreign buyer tax have been implemented in Vancouver, where sales volume has cooled.

The better-than-expected housing starts figures follow strong jobs results for March and adds to the case that the economy is gaining momentum.

"With an early-year flurry of new activity, it looks like residential construction could add more support to Canadian growth than many are thinking for 2017," wrote Robert Kavcic, senior economist at BMO Capital Markets, in a research note.

The Bank of Canada's spring monetary policy report and rate announcement is scheduled for Wednesday. Governor Stephen Poloz has stressed the importance of remaining cautious, though economists expect the central bank to upgrade its forecast for growth.

Infographic: What happened to home prices after the foreign buyer tax

The effects of B.C.'s foreign homebuyer tax on detached home prices vary by region, recently released data suggests.

An infographic complied by Vancouver realtor Farris Kapani and sent to CTV News this week shows that benchmark home prices have dipped between 5.5 and 13.5 per cent in some Metro Vancouver markets.

The infographic does not take into account the annual slowing of sales during the winter months, but it does show a dip in home price benchmarks across all five markets examined.

The data, gathered from the Real Estate Board of Greater Vancouver, compares home price index (HPI) benchmarks from August 2016 to those released at the end of January 2017.

HPI benchmarks differ from averages or medians because they take into account the size of the lot a home is on, the age, number of room and more factors. Benchmarks for the "typical" home are compiled each month based on sale prices.

Kapani looked at how the benchmarks for detached homes changed from data released in August – when the 15 per cent tax took effect – to the numbers released six months later. The infographic compares data from five regions of Metro Vancouver: West Vancouver, North Vancouver, Vancouver East, Vancouver West and Richmond.

The numbers suggested the market affected most by the tax was West Vancouver, where the HPI benchmark dropped 13.5 per cent. Detached homes were selling for a benchmark of $3,359,400 in August, but were down to $2,907,100 in January.

The number of average days on the market increased by 62 per cent in West Vancouver, Canada’s wealthiest municipality, the data showed.

Sales dip in the winter months in most markets, so CTV News pulled the same numbers for the previous year, and found that the dip in HPI benchmark from August 2015 to January 2016 was 9.3 per cent in West Vancouver. The decrease from August 2014 to January 2015 was only 3.1 per cent.

In Richmond, the benchmark was down 8.1 per cent from August 2016 to last month, and the average number of days on the market increased by 113 per cent.

North Vancouver was the next market that appeared hardest hit, seeing a benchmark decrease of 7.4 per cent. The benchmark had increased by 13.7 per cent in North Vancouver the year before.

In Vancouver East, the typical home sold for 6.1 per cent less last month than in August. The previous year, the benchmark increased by 6.3 per cent in the same six-month period.

Vancouver West had the lowest decrease of the five markets included in the infographic at 5.5 per cent. The benchmark had increased by 8.7 per cent during the same period the previous year.

The average number of days on the market increased in all five areas, with the most dramatic increase in Vancouver East, and the lowest increase in North Vancouver.

August vs. January benchmarks for other types of housing

The infographic only compared detached homes, but data pulled on other types of homes during the same period shows how condos and townhouses fared in each market.

Data was not available through the REBGV on West Vancouver townhouses, but the benchmark price for an apartment increased by 1 per cent during the six-month period.

Also on the North Shore, the benchmark for townhouses in North Van decreased by 7.7 per cent, while the typical condo sold for 2.5 per cent less in January than in August.

In Richmond, townhouses dipped 0.9 per cent in January, but the condo benchmark increased by 4.7 per cent.

North of Richmond, Vancouver West townhouses sold for 3.6 per cent less in January than in August, and condos sold for 4.2 per cent less.

The Vancouver East townhouse benchmark was 5.9 per cent lower in January, and the condo benchmark also decreased, but only by 0.2 per cent.

Want to know more about changing benchmarks in your neighbourhood? Reports are available through the REBGV online.

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5 factors that could ‘trip up’ Vancouver’s housing market

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Vancouver’s housing market will continue to cool, but won’t collapse as some have predicted, according to a report released Wednesday by RBC Economics.

Home sales in the city have slid since the B.C. government introduced a 15 per cent tax on foreign homebuyers in August. Even amid recent signs of cooling, RBC said Vancouver is still positioned to attract wealthy investors. This comes as Vancouver’s most expensive house was just listed on the market for $38 million – four times the price it was bought at two years ago.

According to RBC senior economist Robert Hogue, even though a further decline in demand and a moderation of prices is likely, there are five “highly uncertain” factors that could “trip up” Vancouver’s housing market:

1. Policy

Policy implemented by various levels of government may be the biggest factor to influence Vancouver’s housing market – but also the most difficult to predict, according to RBC.  Even though home sales in Vancouver plunged 33 per cent in September and 26 per cent in August, it’s still too early to measure the true effects of the tax, Hogue said.

Policy now the biggest risk to Canada's housing market: RBC

A new report from RBC says while Vancouver's real estate market is set to cool, don't expect to see a hard landing. Senior economist Robert Hogue tells BNN why he sees home prices only mildly contracting and how changing housing policy is now one of the biggest risks to Canada's housing market.

2. The ‘foreign element’

In the five weeks leading up to the foreign buyers’ tax, foreign nationals accounted for 10 per cent of all home buyers in Metro Vancouver, according to data released by the B.C. government. That number decreased to one per cent as foreign buyers scrambled to register transactions at the Land Title Office prior to the Aug. 1 deadline.

There has been speculation about whether the would-be foreign buyers in Vancouver will start tapping into other hot markets, like Toronto. But Hogue said foreign nationals may regain interest once the initial shock from the tax wears off – and that uncertainty of foreign buyer activity poses a risk to the market.   

Vancouver mansion hits market for $38M

An estate in Vancouver’s wealthiest neighbourhood is on the market for a whopping $38 million — four times the amount it was bought for two years ago. CTV News’ Jonathan Glasgow has the details.

3. Speculation

Speculation is a “grey area” that could tip the market over, according to Hogue. Data released by the B.C. government earlier this year indicated that there was only a small uptick in property flipping, but the uncertainty and lack of detailed data could hurt the market.  Hogue said that listings are the first place to spot early signs of trouble.

4. Too much supply

Housing starts in B.C. have soared 46 per cent since the start of 2016, according to recent data from CMHC.  These record-high levels of construction could potentially overshoot demographic requirements, RBC argues. “It is important to note that construction timing uncertainty can be substantial — especially for multi-dwelling projects,” Hogue wrote in his report.

5. Local economy’s dependence on housing

Even with Vancouver’s highly-skilled workforce, the provincial economy largely depends on the housing market, the report noted. Residential construction and real estate industries represented 21.1 per cent of provincial GDP in 2015, according to data from Statistics Canada, exceeding the national average share of 14.6 per cent.

“The flip side of this dependence is that it is also the province most vulnerable to a housing downturn. Any sustained period of significant weakness is likely to have material adverse consequences for the local economy,” the report said. 

Credits to BNN link here

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B.C. to lift foreign buyers tax for people with work permits

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B.C.’s premier has announced the province is lifting the 15 per cent foreign buyers tax for anyone living in Metro Vancouver with a work permit.

The move is an effort to encourage people to come to the province. Those who live, work and pay B.C. taxes will now be exempt from the additional property transfer tax.

“People who are seeking refuge around the world should be able to find safe haven here in our province. We believe the best and the brightest should be able to come to B.C.,” Clark said during a media scrum at the Chinese New Year parade in Vancouver Sunday.

It appears the move is in response to Donald Trump’s executive order banning travel and immigration into the U.S. for people with passports in seven Middle East and North African countries.

“When we see what’s happening down in the United States, I think it’s important to send a message to people who may be wanting to come from America that they are welcome if they’re going to work here and pay taxes here, to buy a home here and make their life here, without buying that extra tax,” Clark told Global News.

The foreign buyers tax was implemented in July 2016 with an enormous amount of support from B.C. residents.

It has since contributed to falling residential real estate sales and a drop in prices, the first time in several years Metro Vancouver has since a reprieve from a skyrocketing market.

As of 2015, there were almost 15,000 work permit holders through the Temporary Foreign Workers program and another 48,000 through the International Mobility Program in B.C.

Credits to Global News

By Jill Slattery

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