From the Desk of Faisal - Real Estate News for the Week of Nov 26th - Dec 2nd
Welcome to Properties Ontario’s weekly update. Our team goes through numerous articles and summarize them for you! Please do not hesitate to contact me if there are any topics you would like to discuss further. If you have any questions about buying, selling, or leasing residential or commercial space, we’re the team for you. For current listings in the marketplace, check out our website www.propertiesontario.com
Canadian Construction Investment
Investment in Canadian construction rose 0.3% from August to September 2018. In dollar terms, the rise was $14.5 billion. This was led by a 1% increase in the multifamily residential construction sector which accounted for $4.8 billion investment. Single family construction investment was down 0.2% to a total of $5.3 billion. On an annual basis, single family investment increased 5.2% while multi-family investment increased 14.6%. Non-residential sector was unchanged at $4.5 billion due to rises in commercial (0.5%) and industrial (2.0%) being offset by declines in the institutional sector (-2.7%). In order to get a better picture, these figures should be reviewed at the end of 2018 in comparison to previous years.
New Construction Statistics for October 2018
According to Building Industry and Land Development (BILD), there were 2,805 condo apartments and townhomes sold in October. These condo units (apartments and townhomes) include low, medium, and high-rise buildings. This figure decreased a remarkable 44% from October 2017 but it was only 1% below the 10-year average. Total new construction sales amounted to 3,296 (down 39.85% from October 2017). For single family homes, there was no change from last year but was 64% below the 10-year average for the month of October. Benchmark price of new condos in the GTA during October was $775,537 (+14.5% annually). The benchmark price of a single-detached home in the GTA was $1,115,824 (-8.4% annually). Total inventory is now at 16,283 in October, representing an increase of 30% from the year before. Condo apartments and townhomes represented 10,982 of those units, up 17.98% annually. For reference, inventory includes pre-construction units, under construction units, and completed units that are ready to move in. Sales to active listings ratio was 20% in October 2018, decreasing 43% from last year. However, the sales to active listings ratio (SALR) is different from the SLNR. Ratios tend to lower as we compare all active listings versus the new ones that came during the month. A SALR is balanced when it is between 12 to 20%. Below 12% would be a buyer’s market and above 20% is a seller’s market.
CMHC Rental Market Survey
The CMHC Rental Market Survey stated that there is currently a vacancy rate of 2.4% from the beginning of the year until end of October 2018. This figure is down for the same period from 3% in 2017 and below the 10-year average which is also 3%. This statistic encompasses units that are delivered to the primary rental market which are essentially rental apartments. Across Canada, the average rent for a two-bedroom apartment increased 3.5% from October 2017 to October 2018. The average was $1,025 with the highest average rents being in Vancouver ($1,649), Toronto ($1,467), and Calgary ($1,272). The secondary rental market which are condo apartments that are rented out have also decreased in its vacancy rate. Currently it is at 1.4% for the month of October. During October 2017 the rate was 1.6%, showing a decrease in the vacancy rate across all types of units and markets.
New Home Sales in the US
Sale activity of newly built single-family homes fell 8.9% monthly in October 2018. This brought the seasonally adjusted annual rate to 544,000 units. When looking at this statistic on an annual basis, October’s new home sales were up 2.8% when compared to October 2017. Year to date, sales were up 6.3% in the Midwest, up 4.1% in the West, up 3.8% in the south, but fell 17.1% in the Northeast. Inventory rose to its highest since January 2009 to a total of 336,000. This translates into 7.4 months of supply. The median sales price fell 3.6% to $309,700 as the market is shifting to townhomes or other types of lower-cost housing.
CMHC 3rd Quarter Financial Report
CMHC released its quarterly financial report which provided some interesting details. According to the report, 177,173 homes received mortgage insurance across Canada. The average insured homebuyer purchased their home at $276,000 while they made an average down payment of 7.7%. Their average credit score was 754. Despite having some of the highest average purchase prices, homebuyers in British Columbia and Ontario made a down payment of 8.8% and 8.7% respectively. Majority of the CMHC insured mortgages had an amortization of 25 years. Arrears rate of insured loans was 0.29%. In other notes, CMHC forecasted GDP growth for 2018 to be at 2% and 1.9% in 2019. Household spending will moderate to 2% for 2018, falling drastically from 3.5% recorded in 2017.
Bank of Canada Broad Monetary Indicator
In previous articles, we discussed the M1+ indicator. This represents all currency outside banks and checkable deposits at chartered banks, trust and loan companies, and credit unions. Another important indicator is the M2++. This entails M1+ and retail debt instruments, Canada Savings Bonds, and non-money market mutual funds. The growth or decline of this indicator plays a major role on influencing inflation which in turns impacts interest rates. The growth rate in September 2018 fell to 5.1% which is a 20.3% reduction from the same month last year. The growth rate is also 29.16% below the median 5-year trend and 25% below the 10-year trend. The M2++ measurement is a strong indication of whether an economy is slowing down. The housing market usually follows suit.