How likely is a Canadian real estate crash in 2021?

Clayton Jarvis
Mortgage Broker News

Ah, the Canadian housing crash. Always just around the corner, yet never seeming to materialize. People write and talk about the derailing of the real estate gravy train so frequently that a person could be forgiven for thinking some portion of the population is secretly rooting for it to happen.

So, what then to make of Lowestrates.ca’s report: Will the Canadian Housing Market Crash in 2021?

To the credit of authors Lisa Coxon and Zandile Chiwanza, the report tries to present the possibility of a housing crash from opposing angles – one arguing the unlikelihood of a crash and the other saying a crash has “already started”.

 

Why a crash isn’t likely

For the pro-crash perspective, Coxon and Chiwanza lean heavily on the fact that both corporations and households are more indebted now than they were in 1990, the last time the Canadian housing bubble was said to have popped due to a recession. While debt levels in Canada are far higher today than they were 30 years ago, interest rates are also far lower. According to Statistics Canada, the conventional rate on a five-year mortgage was 13.35% in 1990, which would give borrowers far less breathing room in the case of financial disruption. And lest we forget, the recession triggered by COVID-19, deemed “the deepest but shortest recession in history”, is technically already over.

Even taking into account the inflated prices homeowners are paying now compared to 1990, few experts see a wave of delinquencies, defaults, or foreclosures hitting the Canadian market in 2021.

“Generally speaking, we’ve seen a flat pattern coming out of [mortgage] deferrals in terms of consumer delinquency overall,” Matt Fabian of TransUnion told MBN. “Certainly, with mortgages, we’re actually seeing a little bit of a drop in delinquency rates.”

But Coxon and Chiwanza argue that the end of programs like mortgage deferrals and government wage subsidies leave the market at risk. They turn to Hilliard MacBeth’s, author of When the Bubble Bursts: Surviving the Canadian Real Estate Crash, comments on the condo market for confirmation that trouble is already brewing.

“‘It’s showing up in the condo market first,” it is stated. “There’s a huge surplus in the condo market, both on condos for rent and condos for sale. And then related to that, there’s a huge number of new purpose-built rentals either on the market or are about to hit the market.’”

Here is where theories of a market crash typically start breaking down, in this author’s opinion. They assume, possibly because Canada’s population is as modest as it is, that the Canadian real estate market is a tiny, self-contained ecosystem where a single pollutant can contaminate the entire thing. That’s not the case. There is no “Canadian real estate market.”

The condo market and the detached market are entirely separate entities. The price of one does not directly impact the price of the other. Sure, if home prices grow too quickly buyers will be forced to start purchasing condos, a trend that will drive condo prices up; but the phenomenon doesn’t work the other way. If condo prices fall, that has no impact on the prices of other housing types. Has anyone reading this article seen evidence that Canada’s falling condo prices slowed the growth of townhouse, detached, or semi-detached prices in 2020?

It’s also important to keep in mind that local real estate markets in Canada are insulated by geography. Falling home prices in Alberta, for instance, will not affect prices in any other province. Why would they?

A nationwide housing crash would require a financial calamity – think 2008 in the US – that threatens the livelihoods (and mortgages) of many of the country’s homeowners, forcing tens of thousands of them spread across every major Canadian real estate market to sell their homes simultaneously, thereby dragging home values down in each one. Those values would then have to be brought low enough that homeowners holding on to their properties would see the entirety of their equity wiped out and be forced to sell into a tanking market. That’s not likely to happen in communities where home values have risen by 5-10% annually over the last several years, and there is no shortage of those.

To be fair, MacBeth isn’t the only person expecting prices to drop. The Real Estate Investment Network recently released a report encouraging investors to prepare for a rise in delinquencies and foreclosures in the third quarter of 2021.

“Housing prices are the last to be affected,” by factors such as decreased economic growth, higher unemployment, and falling immigration numbers, REIN’s Jennifer Hunt said. “They’re lagging indicators. So yes, you’re seeing in many cities in Canada these frothy markets. But that’s exactly the behaviour we look for in a market that is entering a slump.”

A more probable outcome

Even LowestRates.ca CEO Justin Thouin isn’t expecting anything resembling a crash to hit Canadian real estate in 2021.

“Personally, I don’t think we’re going to see a crash,” Thouin told MBN, but added that the amount of debt being carried by Canadians does pose a threat to their ability to pay their mortgages.

“If I were to be most concerned, it would be in the prairies, specifically in Alberta, where the economy is far worse off than the rest of Canada,” he said.

In Thouin’s opinion, low interest rates will continue protecting homeowners from delinquency, while the rebound in immigration and employment expected by many in 2021 should help the economy recover from what has already been almost a full year of COVID-19-related nausea.

This more optimistic view is the predominant theme in LowestRates.ca’s report, which includes Moody’s Analytics economist Abhilasha Singh’s view that home prices in Canada could fall this year, but only by 5% or so.

“‘We expect home prices to fall,’ said Singh. ‘But the recovery is going to be very quick, especially after looking at the results of the vaccines.’” 

She told LowestRates that a crash isn’t on the cards.

“We are expecting a modest correction,” she said. “But not a crash.” 

 

Copyright © 2021 Key Media

2021 home sales will rival 2016 boom year, says B.C. Real Estate Association

https://rem.ax/2MgyIb1
The Vancouver Sun

 The market for single-family detached houses is so hot in Metro Vancouver that a realtor booked 130 tours of a Cloverdale home before turning away other potential customers.

“So sorry! Showings completely full, for every 15-minute slot. Can’t fit any more in, sorry. Do not show up without appointment,” a note on the Multiple Listing Service said last week for the house, which had an asking price of $1.05 million

“We have had over 130 showings booked in 24 hours.”

The B.C. Real Estate Association has just forecast sales for 2021 that are the highest since 2016, when home sales and prices in Metro made international headlines for their stratospheric climbs.

In 2016, there were 112,000 unit sales. For 2021, the Association is forecasting just under 109,000 sales. It’s forecasting a 15.6 per cent rise in sales over 2020 and a 7.7 per cent rise in the MLS average price for 2021, followed by another 3 per cent in 2022.

 

Last summer, real estate agents described pent-up demand for detached homes following the pandemic shutdown. They said this trend has been sustained as some buyers who want more space, often because they are now working at home, also have more purchasing power with lower interest rates. Overall, however, they weren’t seeing the dynamics of the boom years of 2015, 2016 and 2017.

Now, some of them are starting to sense a boom.

“The market is really hot right now and it’s not slowing down,” said Vancouver real estate agent Steve Saretsky. “Most of the froth is in the single family housing market. It’s insanely competitive and comparable to 2016. The condo market is much more balanced though, and buyers can take more time to sift through the inventory.”

“Single family inventory for sale is near record lowest on record. If you’re looking for a house under $2m, there’s 1.6 months of supply. That’s insanely tight and is creating bidding wars. People are seeing prices getting bid up, and now there’s a fear of being priced out.”

Marion Chekaluk, co-founder of Ecom Appraisals Inc. said mid-December to mid-January is usually a very slow time of year for the appraisers and lawyers who process real estate transactions.

But in recent weeks, everyone in her office has been “absolutely run off their feet. I’m getting lenders calling constantly. I had three this (Monday) morning, saying ‘a deal is supposed to happen,’ that ‘subjects need to be removed today. And we’re waiting on this report. You saw the property on Friday.’ They’re asking our appraisers not to take a weekend and I’m saying to them, ‘no, you take your weekend. Because if not, you’ll get burned out.”

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“The whole thing is challenging,” said Chekaluk, referring to the pandemic. “We can’t go into properties. … We are trying to support the value for refinancing, which is not always an easy task.”

She said it’s not easy to make appraisals in a market where sales are happening quickly and appraisers have to make many adjustments to their calculations.

Chief economist Brendon Ogmundson of the real estate association said that interest rates in 2016 were 2.5 per cent. Now, they are at 1.8 per cent, and “that drop is a huge stimulus and is one of the largest reasons what’s happening.”

Other factors include optimism about an economic recovery after the pandemic and a segment of buyers with savings still on the sidelines, said Ogmundson.

[email protected]

 

© 2021 Vancouver Sun, a division of Postmedia Network Inc. All rights reserved.

Property management startup led by former DoorDash execs raises $15 million

Kelsey Pudloski
Livabl

$22 million land sale sets record in Kelowna

Frank O’Brien
Western Investor

A Manitoba buyer has made history with the $22 million purchase of a 190-acre residential development site in the hills above Kelowna in the central Okanagan.

The land is in the Kirschner Mountain Development and part of a 640-acre project that started in 2003. The Kirschner family has since completed the first four phases of single-family lots. The remainder of the property is slated for residential and commercial mixed-use development.

George Greenwood, CEO of the Kelowna-based Association of Interior Realtors (AIR)  said the sale was the largest MLS sale in central Okanagan history.

Mark Boppre, a long-time real estate agent in the Okanagan and Max Carbone, owner of Century 21 Assurance Realty Ltd., co-listed the property in late 2019. They marketed the site across the country during COVID-19 and attracted several out-of-province buyers, including the actual buyer from Manitoba, Carbone said.

Citing confidentiality, Carbone did not release the name of the buyer.

The recent transaction pencils to approximately $115,000 per acre. Recent land sales in Kelowna were smaller parcels of less than two acres in the city that sold for much higher prices per acre. Of the three largest residential parcels that sold in in the year ending in the third quarter of 2020 the average price-per-acre was close to $2 million, according to a survey by HM Commercial Group of Kelowna.

Of three single-family subdivisions currently selling in the Kelowna area, the lot values range from approximately $350,000 to $600,000, though some lots at the lakefront community of McKinley Beach are priced at more than $1 million.

The BC Real Estate Association reports that the current average home price in the Okanagan is $581,188 but it is expected to increase to 8.8 per cent this year to $640,000. The association also forecasts that residential sales through the AIR will increase nearly 10 per cent in 2021, compared to a year earlier, to 12,500 units.

 

© Copyright 2020 Western Investor

Speculation and Vacancy Tax

Staff
other

Vancouver ranked world’s second-least affordable housing market?again

Alissa Thibault
other

City of Toronto Had Nearly 2,000 More Condo Apartments For Sale at the End of 2020 Compared to 2019

Janine Rane
other

Changing lifestyle priorities in the face of COVID-19, coupled with historically low interest rates resulted in a record breaking year for real estate in Canada. Statistics Canada noted in a new report on population growth across sub provincial regions that “more people are opting to live outside of Canada’s largest urban centres, which is contributing to ongoing urban sprawl.” 

This trend played out across the GTA too, where home sales ended the year on a high, and single-family homes were in highest demand with many home buyers putting a premium on space and access to the outdoors. On the flip side, demand for condominium apartments in condo dense cities like the City of Toronto slowed with the average price noting a slight dip; a stark contrast to December 2019 when prices were up 10% year-over-year (y-o-y), demand for condos was soaring, and bidding wars were common. 

For this report, Zoocasa took a closer look at condo market activity in 35 neighbourhoods across the City of Toronto to understand demand and supply trends across the city. We compared the number of active listings for condo apartments (the inventory of available condos) across these neighbourhoods at the end of  December 2020 to December 2019. We also calculated changes in the median condo apartment price – the price at which half the condos that sold, sold for a higher price than the median and where the other half sold for a lower price than the median price. 

Overall, the City of Toronto had 1,972 more active listings for condo apartments in December 2020 compared to the year prior. With 3,120 active condo listings available in the City of Toronto at the end of December, this represented a 172% increase y-o-y or 2.7x more active listings than at the end of December 2019. 

 

Downtown Neighbourhoods Had 3.2x to 3.4x  More Condo Listings Than Last Year

 

Taking a closer look at neighbourhoods across the City of Toronto, Zoocasa found that the parts of the city with the highest concentration of condo apartments experienced the most significant increase in active listings on a y-o-y basis. 

At the top of the list is Toronto’s C01 neighbourhood – spanning Downtown, the Entertainment District, CityPlace, and Liberty Village – which saw a whopping 219% increase or 3.2x more active listings at the end of December 2020 compared to the previous year. Specifically, there were 989 active listings in C01 in December compared to 310 in December 2019. The median sales price dropped 9% or -$58,750 to $611,250. 

According to Anthony Tomasone, a Zoocasa real estate agent in Toronto, the drastic increase in condo inventory in C01 is notable. Tomasone says, “in 2019, C01 was one of the most competitive neighbourhoods in the city. Seeing new listings double, and active listings triple in the span of a year is a testament to the impact that COVID-19 has had on homebuyers in the short run.”

Behind C01 for increases in condo apartment inventory is Toronto’s C08 neighbourhood, encompassing Regent Park, St. James Town, and Corktown, where the median home price dipped 10% to $597,500 y-o-y. There was a 239% increase in active listings compared to December 2019, with 315 or 3.4x more active listings available in the neighbourhood at the end of December 2020. 

Of the top ten neighbourhoods with the greatest increase in active listings at the end of 2020, both C01 and C08 noted the biggest annual decline in the condo median price. 

Rounding out the top three is C15, the area that includes Hillcrest Village and Bayview Village, where despite a 156% increase in active listings, median home prices remained relatively steady – posting a 4% increase to $531,000. 

“For buyers that are looking to get a foothold into the market and thinking about the long term, now might be a good opportunity to consider a condo, particularly in the downtown core. Compared to the same time the year before, buyers have more options and less competition, better prices, and lower interest rates – all favourable conditions for first-time buyers that may otherwise have been priced out of the market,” says Tomasone. 

Check out our infographic below that highlights active listings and median prices in December 2020 for 35 Toronto neighbourhoods compared to December 2019. 

 

© 2015 – 2020 Zoocasa Realty Inc., Brokerage

Vancouver home sales soar 67% in January?s first half

Sean MacKay
Livabl

The Vancouver region housing market shattered a sales record in December to cap off an incredible rebound in the second half of 2020.

Moving into the first month of a new year, all eyes are on the resale market to see if it can maintain its head-spinning velocity or if it’s set to come off the boil.

 

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With mid-month resale figures released by local brokerage Dexter Realty, we can now confidently say it’s looking like the heat won’t be letting up anytime soon as homebuyers have been scooping up properties at a relentless pace.

According to Dexter Realty Managing Broker Kevin Skipworth, home sales in the first 15 days of January — at 977 units — are up 68 percent from the number of transactions recorded during the same period a year ago. When compared to January 2019, they’re up 147 percent.

“In 2019 we were saying buyers are needed! This year much like last year, it’s sellers that are needed!” Skipworth wrote in an email sharing the January mid-month figures.

If buyers took any kind of break during the holidays, they sprung back into action in the New Year with no delays.

And, as Skipworth alluded to, supply currently on the market is far from enough to satisfy the current level of demand present in the Vancouver region. The mid-month data showed that there were 270 fewer active listings available in the first 15 days of January 2021 compared to the same period in 2020, when demand was much less intense.

“This is going to put pressure on prices to rise and continue the pattern of multiple offers,” Skipworth wrote.

“The typical market dynamic of sellers not wanting to list for fear of having to compete for their next home or fear of not finding it in time for when they have to leave the home they sold is unfolding as 2021 takes off,” he added.

 

@2020 BuzzBuzzHome Corp.

Ian Mulgrew: Fear-mongering at the money-laundering inquiry

Ian Mulgrew
The Vancouver Sun

Opinion: President of the ATM Industry Association says RCMP report and testimony claiming ‘white-label’ ATM machines being used extensively to wash drug money are ‘devoid of any evidence’

“White-label” ATMs are cash machines not operated by Canada’s banks or credit unions. Across the country, there are about 50,000 such machines. Photo by Nick Brancaccio /Windsor Star

Chris Chandler found himself growing more and more uncomfortable during testimony last week at the B.C. Commission of Inquiry into Money Laundering.

As veteran RCMP expert Melanie Paddon explained how generic ATM cash machines were being used to wash huge amounts of dirty money, Chandler couldn’t believe his ears.

By the time the Joint Illegal Gaming Investigation Team member had finished, Chandler, the president of the ATM Industry Association, told Commissioner Austin Cullen he needed a moment.

“I’m honestly … I’m just having a hard time controlling myself. Both the report (Paddon read from) and Ms. Paddon’s testimony … are completely devoid of any evidence that people are actually money-laundering through ‘white-label’ ATMs. So I really struggle with this.

“When I look at the estimate provided — $300 million to $1 billion per annum — firstly, that’s a report from 2008 … so by my math in the 13 years since this report was published there should have been $4 billion to $13 billion laundered through white-label ATMs, it seems to me either that number is completely dead wrong or we have a terrible enforcement problem.”

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He paused: “I’m really struggling to compose myself, frankly.”

What are known as “white-label” ATMs are cash machines not operated by Canada’s banks or credit unions. Across the country, there are about 50,000 such machines, which began to spring up in 1996 when the competition bureau ended the banks’ monopoly.

Paddon used the 2008 report to support her claim that criminals could stock white-label ATMs with drug money in order to launder it, and that the machines didn’t require users to have an official relationship with a bank. They could also be used to skirt financial-system safeguards, she said.

“There’s no government oversight in what’s going on when the criminal places the money in the system. They’re not reporting directly to (the Financial Transactions and Reports Analysis Centre),” Paddon noted.

White-label ATMs are “an ideal method” for laundering significant amounts of money for Hells Angels and other drug-trafficking organizations, she maintained.

“Investigations and intelligence files indicate individuals associated with organized crime groups currently control approximately five per cent of white-label ATMs in Canada. If other information is substantiated, the number of white-label ATMs used or controlled by organized crime to launder proceeds of crime could reach 20 per cent of all the ATMs.”

Chandler choked on those figures.

“In 10 years of lobbying for this industry, that (2008 report) has been kept from me,” he told Cullen. “No one has provided it to me until now, and I would put to you the reason for that is because it is completely devoid of context and it’s completely devoid of evidence that people are doing this in large dollars.”

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The commission has heard plenty of hyperbole about money-laundering in casinos, about professionals such as accountants aiding and abetting criminals, and the incredible risk posed by lawyers’ trust accounts and their pesky privileged solicitor-client relationships.

But, as Chandler complained, the evidence is jello and convictions a will-o’-the-wisp.

Was Paddon aware of any investigations or prosecutions that show this occurring and support the catastrophic-sounding numbers?

“No, I am not,” she conceded. “Um, I had an investigation I recently worked on, I can’t give you details, and I can’t tell you exactly how much money was pushed through these ATMs…”

Chandler was incredulous.

“I haven’t figured out what caused that leap of the imagination,” he fumed. “If the 2008 report (numbers) are correct, it would imply that $4 billion to $13 billion (has been laundered). But there has only been one charge, in 2014 (in Winnipeg), involving six ATMs (and a total of $100,000). It is just beyond comprehension.”

Chandler noted that owners of white-label ATMs are subject to criminal checks as well as the “know your client” bank processes and documentation. Each ATM must settle up with a single bank account that is subject to all financial regulations.

He said that using a night-deposit box, a bank ATM or a teller was no different than using the white-label ATM.

“It is impossible for a merchant to keep a second set of books,” he emphasized. “For me to then see a 2008 report from the RCMP with all this conjecture and innuendo and implication about billions of dollars, there is just some giant disconnect somewhere.”

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The federal and provincial governments have established one of the most extensive and expensive data-collection systems in the world, demanding large volumes of reporting, mostly to FINTRAC — which receives almost 10 million more reports a year than its U.S. counterpart.

Yet there are no reliable estimates for the cost of compliance with the money-laundering regime or its cost-effectiveness. No one knows whether the system is working or not.

Still, the sky-is-falling rhetoric dominates and police insist they need more tools and powers to infringe even further on privacy and civil rights.

Asked what would happen if ATM owners were forced to have armoured-car companies deliver the cash to restock machines, Chandler warned:

“A merchant who may be generating $100, $200, $300 a month (from an ATM) for his store, restaurant or bar may suddenly be making $20 or $30 a month and no longer feel that is an appropriate use of the space, and he could generate more money selling potato chips or whatever. I think the impact would be really felt mostly by the Canadian consumer who would suddenly find 40 per cent fewer places for people to get their cash.”

The money-laundering commission’s hearings continue online.

 

© 2021 Vancouver Sun

Condo market is up with sales surging 90% y-o-y on the MLS on the first two weeks of January 2021

Neil Sharma
Canadian Real Estate Wealth