The June numbers provide evidence that residential construction activity is gradually improving; Do record home sales mean the worst is over?
Helen Morris, National Post
Published:Saturday, July 11, 2009
There were positive housing numbers out this week, but analysts still caution against expectations of rapid recovery.
According to the Toronto Real Estate Board, home sales in the GTA rose 27% in June, compared with the same month a year earlier. The Greater Toronto realtors recorded 10,955 sales last month. The June figure translates into a seasonally adjusted annual rate of sales of 100,700.
"The record result in June is testament to the fundamentally sound housing market in the GTA," said the TREB president Tom Lebour in a release. "An increasing number of households have been confident in purchasing a home in the region's affordable and diverse resale housing market."
Alongside rising sales, prices are also increasing. The average price of a transaction in June was $403,972, that is a 2% rise on the same month last year when the average sale price was $395,866.
"The re-emergence of sellers' market conditions has exerted upward pressure on home prices," said Jason Mercer, TREB senior manager of market analysis. "Look for sales to remain high relative to listings in the second half of the year. This will keep home prices growing."
Western cities witnessed similar gains with sales in Calgary rising 27%, but prices were down 6%.
"That's nothing compared with a 75.6% year-on-year jump in Vancouver sales, the second best June ever. This compares with declines of 50-70% around the turn of the year, with the housing market swinging from famine to feast in six months," notes Douglas Porter at BMO Capital Markets Economics. However, prices in Vancouver were down 8%. "If the June pace of sales is close to maintained, prices won't be falling for long."
Looking to the future, building permits in Toronto rose a hefty 26.8% in May, compared with April levels, according to Statistics Canada. The value of permits in Toronto was $914.2-million in May, boosted by a rise in permits for multi-family dwellings. Overall, the total value of permits increased in 21 of 34 census metropolitan areas with the largest gains in Calgary. At the national level, in May, the value of building permits in the residential sector showed a hefty 14.4% increase from a month earlier to hit $2.6-billion, according to Statistics Canada.
"The driver of residential permitting activity was concentrated in multi-family units, which were up 40.6% month-on-month. Single-family permits were up an unimpressive 1.4% month-on-month," notes Charmaine Buskas, senior economics strategist at TD Securities. "Clearly, builders were not scared off by the weak macro economic backdrop, and in fact helped by government spending (in the case of institutional building). This pace of rising activity is unlikely to continue though."
While permits merely record intentions, actual home starts in Toronto also showed an increase.
In June, the seasonally adjusted annual rate for housing starts gained 10% on the previous month to hit 24,000 units, according to the Canada Mortgage and Housing Corporation (CMHC).
"The June numbers provide evidence that residential construction activity is gradually improving," said Shaun Hildebrand, CMHC's senior market analyst for the GTA. "Reduced supply in the resale market and increased incentives from developers will attract more buyers to the new-home market. While housing starts will remain below levels reached in recent years, new residential construction will continue to pick up alongside improving economic conditions."
The national picture was better than forecasters had predicted. According to the CMHC, the seasonally adjusted annual rate of housing starts rose to 140,700 units in June, up 8% from the 130,300 units in May.
"The report adds to the growing body of evidence suggesting that the Canadian housing market may be on the mend," notes Millan Mulraine, economics strategist, TD Securities. "Even so, we do expect residential building activity to remain fairly subdued for some time, with a fully fledged recovery not likely until sometime next year."