Continued record levels of immigration may double Canada’s housing supply gap

Canada has experienced a population boom — growing by over 1.2 million in the past 12 months, surpassing the pace seen in previous years. A recent report from TD Economics delves into whether the swing in population has gone too far, too fast.

The surge, referred to as the “great Canadian migration,” is the result of a combination of factors, including increased immigration targets and a significant rise in non-permanent residents (NPRs). While this influx has helped address labour market shortages, it has also led to various challenges in housing, healthcare, infrastructure and overall societal balance.

 

 

 

 

 

 

 

 

 

 

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Bank of Canada Raises Key Interest Rate For The 10th Time Since March 2022

OTTAWA –

The Bank of Canada has raised its policy interest rate again, making the cost of borrowing more expensive.

The 25 basis points hike brings the Bank’s overnight rate to 5 per cent, the highest it’s been since 2001.

In its Monetary Policy Report, the Bank of Canada says the rate increase was necessary to help slow economic growth and reduce core inflation. Three-month rates of core inflation have been higher than the Bank’s expectation hovering around 3.5 per cent to 4 per cent since September 2022.

“The stubbornness of core inflation in Canada suggests that inflation may be more persistent than originally thought,” the Bank’s Monetary Police Report states.

Since the Bank of Canada started raising rates in March 2022 inflation has dropped from a peak of 8.1 per cent last summer to 3.4 per cent in May. This is the 10th interest rate hike since March 2022.

While the Bank acknowledges inflation has been declining due to falling energy prices, easing supply constraints and interest rate hikes, it predicts inflation will remain elevated around 3 per cent over the next year. The Bank says economic growth isn’t slowing as quickly as expected, citing more momentum for demand and stronger than anticipated consumer spending in the first quarter of 2023.

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SURPRISING REBOUND: METRO VANCOUVER RESALE MARKET DEFIES EXPECTATIONS IN JUNE

In June, the Metro Vancouver resale market continued to surprise on the upside, with rebounding sales activity and month-over-month benchmark price appreciation. Despite a hike to the overnight interest rate on June 7, which caught many off-guard, buyers are showcasing their long-term confidence in Vancouver real estate. There is still a willingness to enter a complex market that is experiencing impacts from several external sources.

GREATER VANCOUVER

2,988

SALES

                                                                                          ————————

-12.4%

MOM%

                                                                                          ————————

+21.1%

YOY%

————————

+1.3%

MOM BENCHMARK %

                                                                                        ————————

GREATER VANCOUVER RESALE MARKET DEFIES SEASONAL TRENDS WITH A CONTINUED PRICE SURGE

The Greater Vancouver resale market notched its sixth consecutive monthly price increase in June, despite an elevated rate environment and a shift into the Summer season that typically sees sales slow. In particular, condominium prices have now nearly returned to 2022’s peak – showcasing the strength and speed of the recovery thus far.

Residential home sales in the region reached 2,988, a significant 21.1% increase compared to June 2022, but are still 8.6% below the 10-year seasonal average of 3,269 sales. On the supply side, inventory levels remain a key challenge for the market, with 9,990 properties listed for sale in June. This represents a 7.9% decrease compared to the previous year, and a 17.4% drop below the 10-year seasonal average.

This ongoing mismatch between buyer demand and inventory levels is reflected in the sales-to-listings ratio, which was 31.4% for June 2023. Significant upward price pressure is expected to persist at these levels, with further gains in the HPI benchmark price expected in July.

The MLS® Home Price Index composite benchmark price for all residential properties in Metro Vancouver is currently $1,203,000, a 2.4% decrease from June 2022, but a 1.3% increase from May 2023.

SALES TO LISTING RATIO

31%

ALL PROPERTY TYPES

        ————————

39%

TOWNHOUSE

 

————————

 

39%

CONDO

21%

DETACHED

 

FRASER VALLEY

1,935

SALES

                                                                                   ——————————-

+13.1%

MOM %

                                                                                   ——————————-

+51.1%

YOY%

                                                                                    ——————————-

+2.1%

MOM BENCHMARK %

                                                                                  ——————————-

RISING PRICES AND LOW INVENTORY POINTS TO A HEATED SELLER’S MARKET IN THE FRASER VALLEY

Parallelling many of the themes North of the Fraser, the Fraser Valley real estate market experienced solid sales activity in June, returning to levels consistent with the 10-year monthly average. Overall, the region recorded 1,935 sales, marking a significant 51.1% increase compared to June 2022 and a 13.1% increase compared to May 2023, which contradicts usual summer patterns.

In terms of supply, the FVREB received 3,424 listings in June, reflecting a 2.8% increase compared to the previous year but a 3.1% decrease compared to May 2023. Despite gains in inventory levels in recent months, there still needs to be more active listings to meet current demand levels. Consequently, the sales-to-listings ratio was 37%, up 3% from the previous month, and suggesting a heated seller’s market.

These dynamics have supported the prevailing trend of rising prices in the Fraser Valley. June saw the fifth consecutive price increase of 2023, appreciating 2.1% month-over-month to an overall benchmark price of $1,040,900.

SALES TO LISTING RATIO

33%

ALL PROPERTY TYPES

 

59%

TOWNHOUSE

46%

CONDO

30%

DETACHED

 

——————————————————————-

 

GREATER VICTORIA

705

SALES

                                                                                          ————————-

-9.0%

MOM%

                                                                                          ————————

+15.2%

YOY%

                                                                                            ————————

INVENTORY INCREASE SIGNALS POSITIVE SIGNS IN VICTORIA’S REAL ESTATE MARKET

The Victoria Real Estate market saw steady performance in June, with 705 properties sold, a 15.2% increase from June 2022 but a 6.6% decrease from the previous month. Per VREB Chair Graden Sol, this is a return to a more traditional seasonal sales cycle – with a peak in Spring followed by a reduced but stable Summer market.

Inventory rose by 7% compared to May 2023, with 2,342 active listings, a positive sign in a market that has seen depressed listing activity. Despite this, the overall sales-to-listings ratio remains at an elevated 30.1% – indicating a similarly tight market as seen in the Lower Mainland.

In June, benchmark prices in the region were $1,310,100, a 1.0% increase from the previous month, but remaining 7.0% down year-over-year.

 

Credit to: MLA Canada Newswire, July 6, 2023

Vancouver And Toronto Are Never Going To Be “Affordable,” So Now What?

PUBLISHED: 2:28 PM JUN 21, 2023

Last month, economists at the Bank of Montreal released a report on Canada’s “affordability conundrum” that delivered some sobering news for anyone paying attention.

Despite “a significant price correction” across most of Canada, affordability remains elusive — and is unlikely to gain traction any time soon. The authors also underscored their long-held position that more housing supply will not be the fix we need to address the housing crisis.

So instead of asking when we might see market housing become affordable again, is it time to ask — at least in certain urban markets — if it’s time to accept high prices as the new normal? If we accept that reality, say some experts, then we can have an honest discussion about the need for subsidized housing and alternative forms of ownership, and acknowledge that any additional market supply will not reduce prices.

After all, even when we do see price drops in Vancouver and Toronto, they are negligible, not near enough to resume the affordability of a decade ago.

The general rule is that housing is affordable when it accounts for no more than one-third of one’s gross income. On June 1, the National Bank of Canada released its quarterly affordability monitor, which showed mortgage payments as a percentage of one’s income had reached nearly 61% nationwide in the first quarter. That’s a drop of 3.2% from the previous quarter, which doesn’t seem like much. And it comes after having reached the most unaffordable level in more than 30 years.

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Housing Affordability Will Deteriorate Unless We Act Soon: CMHC Chief Economist

When Bob Dugan surveys the future of Canada’s housing market, he doesn’t see the rosy picture many long for. 

“I’m actually worried that affordability is going to deteriorate rather than improve unless we can do something about it,” the chief economist at Canada Mortgage and Housing Corporation told The Canadian Press on Friday.

A day earlier, the country had learned from the Canadian Real Estate Association that the actual national average home price was $729,044 in May, up 3.2 per cent from a year earlier, while the seasonally adjusted average home price was $715,290, up 2.7 per cent from April. The average topped $1 million in the Greater Toronto Area and several parts of B.C.

Dugan’s feelings about the lack of affordability have been festering within the federal housing agency for some time, prompting it to ring alarm bells last summer, when it revealed the country needed to build 3.5 million more homes than it is on track for to reach some semblance of affordability.

A year later, the situation looks no better. Some 271,000 homes were built two years ago and roughly 260,000 last year, Dugan said.

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Bank Of Canada Raises Interest Rate For First Time Since January, Now 4.75%

The Bank of Canada (BoC) put an end to its rate pause on Wednesday, announcing another 0.25% increase to its policy rate, bringing it up to 4.75%.

This marks the first rate hike since January, and follows two consecutive pauses from the bank as they waited to see how their already-implemented increases worked to tamp down inflation. Going into the rate announcement, experts were uncertain about what to expect, with a recent report from Desjardins calling it “almost a coin flip at this point.”
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