A leading national measure of home prices was decidedly average in September.

The Teranet-National Bank National Composite Home Price Index was flat at 226.23 (up 0.05% from August), but in line with the historical average for September since 2010.

Of the 11 metros included in the survey, five gained – Winnipeg (1.1%), Montreal (0.5%), Victoria (0.5%), Hamilton (0.2%) and Ottawa-Gatineau (0.1%) – the weakest diffusion in 6 months.

Vancouver and Edmonton indexes were flat month-over-month while there were declines for Toronto (−0.1%), Calgary (−0.1%), Halifax (−0.2%) and Quebec City (−0.6%).

Taking out seasonal effects, the index edged up in September, recovering some of the ground lost in previous months, especially in Toronto.

But for Vancouver and Calgary the seasonally adjusted indices extended a string of declines, consistent with the weakness in home sales reported by the respective real estate boards of these two metropolitan areas.

Annual rise greater than in August

On a year-over-year basis, the national index gained 2.1%, a larger gain than in August as the index began declining in September 2017.

The largest gains were in Vancouver (6.2%), Victoria (5.5%) and Halifax (4.8%) thanks to gains earlier in the year while recent advances resulted in relatively large 12-month gains in Ottawa-Gatineau (5.1%) and Montréal (4.8%).

Winnipeg (2.8%), Hamilton (1.4%) and Quebec City (0.7%) also gained but there were year-over-year declines for Edmonton (−0.5%), Toronto (−0.8%) and Calgary (−1.3%).

The indexes reflect percentage gain/decrease from a base value of 100 in June 2005

Several challenges continue to concern real estate professionals but there is still optimism for the sector in the year ahead.

A new report from PwC Canada and the Urban Land Institute shows that the industry’s concerns include tariffs and interest rates which could further weaken affordability.

For those developers, investors, lenders and other leading experts involved in the residential real estate sector, land supply is the top concern heading into 2019.

“Dealing with the affordability issue is a shared responsibility between government and developers. While government addressed demand by introducing measures like tighter mortgage rules and foreign taxes, they neglected the supply side,” says Frank Magliocco, National Real Estate Leader, PwC Canada. “Reducing regulation and making more land available for development in a timely manner will help address the affordability issue.”

With the proportion of household income needed to service the costs of a single-family home rising to 53.5% in the first quarter of 2018 (and as much as 119.3% in Vancouver), the impact of rising interest rates and tariffs on steel are also large concerns.

Commercial sector
For the commercial real estate sector, multi-family remains strong along with industrial, which should benefit from demand for growing facilities for Canada’s burgeoning cannabis sector.

The struggles for retail continue as the sector faces more competition from ecommerce. This sector is being forced to reinvent itself.

Coworking space is driving demand in the office sector and is projected to make up 30% of corporate real estate portfolios by 2030.

There is also growth expected in the seniors sector with the aging population driving demand for this housing type.

Technology continues growth
Despite growth in the PropTech sector, including new lending platforms and digital real estate brokerages, just 10% of executives said they were concerned about the speed of technological change.

According to the report, PropTech is forecasted to add US$5.2 billion in new investment globally across 454 equity deals in 2018, after reaching a record US$3.4 billion in 2017 across 367 deals.

Drones are considered the top tech disruptor for the real estate sector, the poll found, followed by autonomous vehicles, cybersecurity and construction technology.

Home resales in Canada were driven by the Greater Toronto Area in July with a 7.7% gain compared to 1.9% nationally.

The GTA also saw a flattening of price growth which has been declining in recent months. RBC’s senior economist Robert Hogue says that the national benchmark price appreciated at a faster rate (2.1% y/y) for the first time in 15 months.

In a monthly housing report, Hogue says that, with a few exceptions, price acceleration is unlikely to be a major factor in the Canadian housing market in the coming months.

“We see little risk that prices will accelerate much further in the near term. Except in a few areas (including Ottawa and Montreal where sellers have a slight upper hand), demand-supply conditions are balanced in the majority of markets in Canada, which does not support rapid price growth. Vancouver prices are in fact decelerating at present,” he writes in his report.

He added that he and his colleagues believe that the market is adapting to the impact of the mortgage stress test and while some sellers may still be reluctant to list their homes, RBC Economics forecasts a recovery of the resales market across most areas through the second half of 2018.

Supply boost for GTA, constraint nationally
The GTA saw more homes on the market in July but new listings were down 1.2% nationally.

There was a notable drop in new listings in Vancouver, Calgary and Edmonton, and to a lesser extent in Ottawa and Montreal.

The CMHC wants the Canadian Revenue Agency to provide more robust verification of incomes stated on mortgage applications.

The call comes following an investigation by the CMHC into the correlation between incomes stated on mortgage applications and those reported to the CRA.

It now wants the tax agency to take a “more direct and formal role” in verifying incomes according to documents obtained by Reuters.

Some other countries including the US and UK have systems where the tax agency does provide lenders with verification of mortgage applicants’ incomes and the CMHC believes this would cut potential incidents of mortgage fraud, which can have a serious impact on the economy, especially if there is another financial crisis.

The CRA told Reuters that it is looking into ways that it can respond to CMHC’s concerns and provide lenders with income verification.

While the majority of Canadians are honest on their applications, a recent study by Equifax found that 13% think it’s ok to lie on a mortgage application and 16% believe mortgage fraud to be a “victimless crime”.

The study of mortgages originated between 2013 and 2016 found a 52% spike in suspicious mortgages, mostly in the highest priced housing markets.

Buyers looking for detached homes in Metro Vancouver have more choice as sales weakened again in June.

Detached home sales fell 42% to 766 and the Real Estate Board of Greater Vancouver says that the sector is leading the move towards a buyers’ market.

“Buyers are less active today. This is allowing the supply of homes for sale to accumulate to levels we haven’t seen in the last few years,” Phil Moore, REBGV president said. “Rising interest rates, high prices and more restrictive mortgage requirements are among the factors dampening home buyer activity today.”

Although new listings were down 7.7% across all residential property types year-over-year and down 17.2% from May 2018, total active inventory was 8,515, 40.3% higher than a year earlier.

While detached sales recorded the largest decline year-over-year, apartment sales were also down sharply (by 34.9% to 1,240) along with attached homes (down 37.3% to 419).

Price growth is slowing
The increased supply and weakened demand means that, although prices continue to rise, the acceleration of prices is slowing.

The benchmark price for a detached home is $1,598,200, up 0.7% from a year earlier but down 0.6% compared to May 2018.

For apartments the benchmark is $704,200, up 17.2% y-o-y and up 0.4% m-o-m; for attached homes the benchmark price of $859,800 is up 15.3% y-o-y but virtually unchanged month-over-month.

“With reduced demand, detached homes are entering a buyers’ market and price growth in our townhome and apartment markets is showing signs of decelerating,” noted Moore.

Canadian housing starts declined in May as overall multi-family construction in urban areas weakened.

CMHC’s 6-month moving average shows 216,362 starts in May compared to 225,481 in April.

“In May, the national trend in housing starts declined following several months of stability,” said Bob Dugan, CMHC’s chief economist. “This reflects a decline in multi-unit urban starts in May that leaves them close to their 10-year average following several months of historically elevated levels.”

The figures show a divergence in construction trends in the two hottest markets.

Vancouver saw continued growth in multi-family, which led overall gains. Multifamily starts increased 9% in the past year.

Toronto, by contrast, saw fewer overall starts and this was notable in the multifamily sector. CMHC says that the CMA’s stronger supply of existing units and higher mortgage costs are key factors.

Langford saw strong gains for condo starts in Metro Victoria and the metro as a whole has seen increased building activity especially in rental units.

Multifamily has also led to a rise in overall starts for Saskatoon while it was single-family homes that increased most in Brantford due to more affordable home prices than nearby Hamilton.

Although multiple units led construction in some markets, nationally they declined 16.4% in the standalone monthly figure (seasonally adjusted annual rate) to 119,811 units while single-family units increased 2% to 58,390. Overall, the monthly figure was down 11.1% to 178,201.

The national rate of home price appreciation has averaged more than 10% in the past 2 years but that’s set to change significantly.

In its latest housing market forecast, RBC Economics predicts a rise in home prices of just 1.8% for 2018 as policy actions and interest rates conspire to cool the market.

Economists are also expecting that home resales will be weaker in 2018 than 2017 (down 4.5% following a 4.3% drop in 2017) making the second year of annual declines, something not seen in Canada since the mid-90s.

But while price appreciation is to soften, RBC Economics does not see a significant correction nationwide; this risk, it says, is contained.

Supply-demand balance is expected to be seen in most major markets including Ontario and British Columbia, with steady support coming from economic fundamentals.

The mortgage stress test’s long-term impact
The tighter lending rules created by the new mortgage stress tests introduced by OSFI at the start of 2018 “will ultimately dampen homebuyer demand in Canada” RBC Economics senior economist Robert Hogue believes.

He adds in the report that the stress test will impact homebuyers’ budgets leading to growth for the lower-priced housing types at the expense of pricier units. This, he notes, is already being seen in Toronto and Vancouver and is expected to extend to other cities.

Interest rates will also continue to impact the market, with four more hikes forecast through to mid-2019 taking the rate to 2.25%. Hogue says that this will start to have more pronounced impact later in 2018.

SURREY, BC – Buyer activity in the Fraser Valley stayed coy throughout April despite a bump in inventory across all three major residential types.

The Fraser Valley Real Estate Board processed 1,708 sales of all property types on its Multiple Listing Service® (MLS®) in April, a decrease of 23.4 per cent compared to the 2,230 sales in April of last year, and a 2.6 per cent increase compared to the 1,664 sales in March 2018.

Of the 1,708 sales processed last month 413 were townhouses and 498 were apartments, together representing 53 per cent of all transactions in April.

Active inventory for the Fraser Valley finished at 5,667 listings last month, increasing 18.2 per cent month-over-month, and 15.3 per cent when compared to April 2017.

“While it’s great to see the increase in inventory we were looking for, both buyers and sellers remain careful as pricing continues to climb,” said John Barbisan, Board President.

The Board received 3,429 new listings in April, a 19.7 per cent increase from March 2018’s 2,865 new listings, and a 16.2 per cent increase compared to April 2017.

“This isn’t the same spring market we saw each of the last two years, but listings that are selling are still going fast. If you’re considering buying or transitioning from a strata to a detached home, be prepared to move quickly, and talk to a REALTOR® who can support you through the whole process.”

For the Fraser Valley region the average number of days to sell an apartment in April was 14, and 16 for townhomes. Single family detached homes remained on the market for an average of 26 days before selling.

HPI® Benchmark Price Activity

• Single Family Detached: At $1,009,200, the Benchmark price for a single family detached home in the Valley increased 0.8 per cent compared to March 2018, and increased 13.5 per cent compared to April 2017.

• Townhomes: At $549,900, the Benchmark price for a townhome in the Fraser Valley increased 1.5 per cent compared to March 2018, and increased 23 per cent compared to April 2017.

• Apartments: At $447,500, the Benchmark price for apartments/condos in the Fraser Valley increased 1.6 per cent compared to March 2018, and increased 45.8 per cent compared to April 2017.

Full package:
http://www.fvreb.bc.ca/statistics/Package201804.pdf