New home prices in Canada climbed 0.1 percent in December from November, as expected, for an average annual increase in 2013 of 1.8 percent, the slowest since 1999, according to Statistics Canada data released on Thursday.
The monthly advance matched the median forecast in a Reuters poll of analysts and reinforces the view that the country’s housing market is stabilizing after a recent boom.
The closely-watched Toronto-Oshawa region was the top contributor to the monthly advance in the new housing price index with a gain of 0.2 percent in December and of 1.4 percent year-on-year.
Vancouver, another hot market for real estate, saw a 0.1 percent monthly decline in prices and a 1.1 percent decline from a year earlier.
Nationwide, prices rose 1.3 percent in the 12 months to December, down from 1.4 percent in November and the fifth straight month of slowing growth.
Overall, prices were unchanged in 11 metropolitan regions, down in five and up in five.
The Canadian government has intervened in the mortgage market several times since 2008 to cool the sector, and most economists expect a gradual softening rather than a U.S.-style crash.
The new housing price index excludes condominiums, which the government says are a particular cause for concern.
Canada Scraps 'Millionaire Visa,' Sends B.C. Property Market Reeling
Real estate agents in Vancouver say property prices could take a hit, after Canada scrapped a program which allowed wealthy immigrants to fast-track the visa process.
The Immigrant Investor Program, launched in 1986, offered visas to business people with a net worth of at least $1.6 million who were willing to lend $800,000 to the Canadian government — for investment across Canada — for a term of five years.
By 2012, the scheme had to be temporarily frozen due to a huge backlog of applications from wealthy mainland Chinese hoping to come to B.C. Now, the government has announced it will end the program for good and scrap all 59,000 applications backlogged worldwide.
The decision came less than a week after the South China Morning Post published a series of exclusive investigative reports into the controversial scheme.
Property prices could take a hit
In West Vancouver, real estate agent Clarence Debelle is still receiving offers from mainland China for luxury property, but she’s concerned the end of the investor program will have an impact on the local economy and the high-end housing market.
“I deal directly with these people who bring a lot of wealth, who are creating lots of jobs for local Canadians — builders, trades, architects, realtors like myself,” said Debelle.
“Most of the buying is coming from Chinese immigrants who are wealthy, so if we make it difficult for them to come into this country, we have killed 80 to 90 per cent of the buying in West Vancouver.”
Immigration lawyer Richard Kurland agrees.
“When you suddenly stave off the intake of literally hundreds of millionaires in the Vancouver property market, prices can only go one way and that’s down,” said Kurland.
Market impacted by more than investors
Others aren’t so sure. Even with the investor program frozen, housing prices continued to rise.
Tom Davidoff with UBC’s Sauder School of Business says the market is driven by other things like low interest rates and the local and global economies.
“Given that in the last couple of years, we haven’t seen the market cool off, it’s hard to believe that freezing the investor market is going to kill even the high-end in Vancouver,” said Davidoff.
The government has also announced the end of the Entrepreneur Program, a smaller scheme for business people who plan to own and manage a business in Canada.
However, wealthy investors can still come to Canada through the Start-up Visa Program, which encourages immigrant entrepreneurs to partner with private sector organizations to invest in local start-ups.
The Immigrant Investor Program, launched in 1986, offered visas to business people with a net worth of at least $1.6 million who were willing to lend $800,000 to the Canadian government — for investment across Canada — for a term of five years.
By 2012, the scheme had to be temporarily frozen due to a huge backlog of applications from wealthy mainland Chinese hoping to come to B.C. Now, the government has announced it will end the program for good and scrap all 59,000 applications backlogged worldwide.
The decision came less than a week after the South China Morning Post published a series of exclusive investigative reports into the controversial scheme.
Property prices could take a hit
In West Vancouver, real estate agent Clarence Debelle is still receiving offers from mainland China for luxury property, but she’s concerned the end of the investor program will have an impact on the local economy and the high-end housing market.
“I deal directly with these people who bring a lot of wealth, who are creating lots of jobs for local Canadians — builders, trades, architects, realtors like myself,” said Debelle.
“Most of the buying is coming from Chinese immigrants who are wealthy, so if we make it difficult for them to come into this country, we have killed 80 to 90 per cent of the buying in West Vancouver.”
Immigration lawyer Richard Kurland agrees.
“When you suddenly stave off the intake of literally hundreds of millionaires in the Vancouver property market, prices can only go one way and that’s down,” said Kurland.
Market impacted by more than investors
Others aren’t so sure. Even with the investor program frozen, housing prices continued to rise.
Tom Davidoff with UBC’s Sauder School of Business says the market is driven by other things like low interest rates and the local and global economies.
“Given that in the last couple of years, we haven’t seen the market cool off, it’s hard to believe that freezing the investor market is going to kill even the high-end in Vancouver,” said Davidoff.
The government has also announced the end of the Entrepreneur Program, a smaller scheme for business people who plan to own and manage a business in Canada.
However, wealthy investors can still come to Canada through the Start-up Visa Program, which encourages immigrant entrepreneurs to partner with private sector organizations to invest in local start-ups.
UPDATE 1-Canadian Housing Starts Slow Modestly In January
TORONTO, Feb 10 (Reuters) - Canadian housing starts fell more than expected in January, data released on Monday showed, reinforcing the view that the country's housing market is stabilizing after a recent boom.
Starts slowed to 180,248 units last month at a seasonally adjusted annualized rate, a report from Canada Mortgage and Housing Corp showed, shy of the 184,000 forecast by economists.
In December, starts were a downwardly revised 187,144. They were originally reported as 189,672.
The January figure continues a trend that has seen groundbreakings slow from 187,923 units in 2013 and the breakneck pace of 214,827 starts in 2012, when the housing market was at record highs and the government intervened to tighten mortgage lending rules.
Economists are largely predicting a softer but stable Canadian market this year as mortgage rates edge higher and the economy continues to chug along slowly.
"We anticipate that construction activity will continue to edge lower over the course of the year as the forecast increase in interest rates should restrain demand," David Tulk, chief Canada macro strategist at TD Securities, wrote in a research note.
"A smaller contribution from the housing market is consistent with the macro theme of domestic fatigue that will leave headline (economic) growth at or below its trend rate until net exports are able find their footing both in response to a weaker currency and a fundamentally stronger U.S. economy," Tulk added.
Multiple urban starts - typically condos - fell 6.0 percent to 102,289 units in January, while single detached starts rose 3.4 percent to 60,869 units, a modest rebound after two months of weakness.
Starts were down in British Columbia, Quebec and the Atlantic region, but rose strongly in Ontario and the Prairies.
RBC economist Josh Nye said unusually bad weather in December and January may have weighed on activity, and that housing starts could stage a small recovery in the next few months. Nye also noted that building permits outpaced starts in the fourth quarter of 2013 - 210,200 permits versus 194,500 starts - which could mean homebuilding will strengthen in the near term.
"However, we expect modestly higher interest rates as 2014 progresses will weigh on housing affordability and lead to some moderation in residential building activity going forward," Nye wrote in a research note.
Starts slowed to 180,248 units last month at a seasonally adjusted annualized rate, a report from Canada Mortgage and Housing Corp showed, shy of the 184,000 forecast by economists.
In December, starts were a downwardly revised 187,144. They were originally reported as 189,672.
The January figure continues a trend that has seen groundbreakings slow from 187,923 units in 2013 and the breakneck pace of 214,827 starts in 2012, when the housing market was at record highs and the government intervened to tighten mortgage lending rules.
Economists are largely predicting a softer but stable Canadian market this year as mortgage rates edge higher and the economy continues to chug along slowly.
"We anticipate that construction activity will continue to edge lower over the course of the year as the forecast increase in interest rates should restrain demand," David Tulk, chief Canada macro strategist at TD Securities, wrote in a research note.
"A smaller contribution from the housing market is consistent with the macro theme of domestic fatigue that will leave headline (economic) growth at or below its trend rate until net exports are able find their footing both in response to a weaker currency and a fundamentally stronger U.S. economy," Tulk added.
Multiple urban starts - typically condos - fell 6.0 percent to 102,289 units in January, while single detached starts rose 3.4 percent to 60,869 units, a modest rebound after two months of weakness.
Starts were down in British Columbia, Quebec and the Atlantic region, but rose strongly in Ontario and the Prairies.
RBC economist Josh Nye said unusually bad weather in December and January may have weighed on activity, and that housing starts could stage a small recovery in the next few months. Nye also noted that building permits outpaced starts in the fourth quarter of 2013 - 210,200 permits versus 194,500 starts - which could mean homebuilding will strengthen in the near term.
"However, we expect modestly higher interest rates as 2014 progresses will weigh on housing affordability and lead to some moderation in residential building activity going forward," Nye wrote in a research note.
Toronto House Prices Could Slip In 2015, TD Bank Predicts
Report estimates Toronto, Vancouver real estate markets are 10 to 15 per cent overvalued, compared to 10 per cent for rest of country
Barely has the year — and a whole new round of bidding wars — begun and the first of the big banks has weighed in with a warning that Toronto’s housing market is 10 to 15 per cent overvalued.
So is Vancouver’s, says TD Economics in a report released Monday, noting that both cities have been seeing “frothier conditions” than the rest of the country, where house prices remain about 10 per cent overvalued, largely because of low interest rates.
“Toronto and Vancouver make up 40 per cent of the Canadian housing market, so that’s what’s really driving the overvaluation measure,” said TD economist Diana Petramala in an interview.
A spike in interest rates or a “negative economic shock” could potentially send resale home prices tumbling by 25 per cent, Petramala notes. But it’s far more likely there will be a “gradual unwinding of excesses” in the Canadian market as interest rates slowly rise, along with incomes, over the next few years.
It’s likely to be 2015 until Toronto, and much of the country, start to see any real downturn in sales and prices, according to TD.
While Toronto home prices jumped 6.8 per cent in 2012 and 5.4 per cent in 2013, they could rise just 2.7 per cent this year and slip by 1.2 per cent in 2015, when interest rates are expected to start climbing, the report forecasts.
Petramala notes that “prices ended 2013 on a much higher note than we had been expecting as households faced an unusually low level of homes for sale.”
That has played out in the old City of Toronto, in particular, in an unexpectedly feverish start to 2014, with a simple Junction Triangle row house going for $210,000 over asking price in a flurry of 32 bids.
“The one concern we have is that we’re seeing more strength in Toronto’s house prices than expected,” says Sal Guatieri, senior economist with BMO Capital Markets.
Even all those new condos coming on the market haven’t been enough to hold down housing prices, says Guatieri, noting that resale condo prices were up almost 4 per cent in December, year over year.
“We thought, if anything, Toronto house prices would fall somewhat last year. But underlying demand is pretty strong, net migration is pretty healthy and the number of echo boomers aged 30 to 34 is growing quite rapidly at the moment and they are a prime homebuying cohort, especially for condos.”
The housing market is “overshooting,” but “it’s not a market that is crashing,” says Benjamin Tal, deputy chief economist at CIBC World Markets.
He continues to believe that the market will slow to a soft landing and that real estate numbers to be released this week detailing January sales and prices (those from the Toronto Real Estate Board are due out Wednesday) could start to provide a more “realistic” picture of the health of the housing sector.
“This market will be tested when interest rates start rising, and that means it won’t be tested for a while.”
The Canadian housing market and worries about a real estate bubble have been key concerns for policy-makers for several years.
Recent indicators have suggested the market may be headed for a soft landing instead of a bubble bursting, but concerns have persisted.
Barely has the year — and a whole new round of bidding wars — begun and the first of the big banks has weighed in with a warning that Toronto’s housing market is 10 to 15 per cent overvalued.
So is Vancouver’s, says TD Economics in a report released Monday, noting that both cities have been seeing “frothier conditions” than the rest of the country, where house prices remain about 10 per cent overvalued, largely because of low interest rates.
“Toronto and Vancouver make up 40 per cent of the Canadian housing market, so that’s what’s really driving the overvaluation measure,” said TD economist Diana Petramala in an interview.
A spike in interest rates or a “negative economic shock” could potentially send resale home prices tumbling by 25 per cent, Petramala notes. But it’s far more likely there will be a “gradual unwinding of excesses” in the Canadian market as interest rates slowly rise, along with incomes, over the next few years.
It’s likely to be 2015 until Toronto, and much of the country, start to see any real downturn in sales and prices, according to TD.
While Toronto home prices jumped 6.8 per cent in 2012 and 5.4 per cent in 2013, they could rise just 2.7 per cent this year and slip by 1.2 per cent in 2015, when interest rates are expected to start climbing, the report forecasts.
Petramala notes that “prices ended 2013 on a much higher note than we had been expecting as households faced an unusually low level of homes for sale.”
That has played out in the old City of Toronto, in particular, in an unexpectedly feverish start to 2014, with a simple Junction Triangle row house going for $210,000 over asking price in a flurry of 32 bids.
“The one concern we have is that we’re seeing more strength in Toronto’s house prices than expected,” says Sal Guatieri, senior economist with BMO Capital Markets.
Even all those new condos coming on the market haven’t been enough to hold down housing prices, says Guatieri, noting that resale condo prices were up almost 4 per cent in December, year over year.
“We thought, if anything, Toronto house prices would fall somewhat last year. But underlying demand is pretty strong, net migration is pretty healthy and the number of echo boomers aged 30 to 34 is growing quite rapidly at the moment and they are a prime homebuying cohort, especially for condos.”
The housing market is “overshooting,” but “it’s not a market that is crashing,” says Benjamin Tal, deputy chief economist at CIBC World Markets.
He continues to believe that the market will slow to a soft landing and that real estate numbers to be released this week detailing January sales and prices (those from the Toronto Real Estate Board are due out Wednesday) could start to provide a more “realistic” picture of the health of the housing sector.
“This market will be tested when interest rates start rising, and that means it won’t be tested for a while.”
The Canadian housing market and worries about a real estate bubble have been key concerns for policy-makers for several years.
Recent indicators have suggested the market may be headed for a soft landing instead of a bubble bursting, but concerns have persisted.
Subscribe to:
Posts (Atom)