FEBRUARY 2012. Greater Toronto REALTORS® reported 4,567 sales through the TorontoMLS® system in January 2012. This number was 8.8 per cent higher than the 4,199 sales reported in January 2011. Sales growth was strongest for low-rise home types in the regions surrounding the City of Toronto.

“A favourable affordability picture bolstered by very low posted fixed mortgage rates has kept home buyers confident in their ability to achieve the Canadian goal of home ownership,” said Toronto Real Estate Board President Richard Silver. “The buyer pool remains diverse in the GTA with strong interest in home types across the pricing spectrum,” continued Silver.

The average selling price for January 2012 transactions was $463,534 – up by almost nine per cent compared to January 2011.

“Low inventory levels have kept competition between buyers strong, resulting in robust annual rates of price growth over the last year. Strong price growth is expected to attract more listings. A better supplied market should result in a slower rate of price growth, especially in the second half of 2012,” said Jason Mercer, the Toronto Real Estate Board’s Senior Manager of Market Analysis. (Source: Toronto Real Estate Board)

Canada will likely avoid a crash or serious correction in its “somewhat pricey” housing market, with the possible exception of Vancouver, says a new paper from Bank of Montreal. The analysis by BMO economists suggests alarms about Canada's housing market by international observers, from the International Monetary Fund to The Economist magazine, are exaggerated or simplistic.

“The main takeaway is that the national housing market appears somewhat pricey, but is far removed from a bubble,” said economists Sherry Cooper and Sal Guatieri in their report. “In our view, the [market] is more like a balloon than a bubble. While bubbles always burst, a balloon often deflates slowly in the absence of a ‘pin'.”

Even Toronto's hot condo market – one of the subjects of many of the warnings – is more likely to cool rather than collapse, BMO said, noting that a sharp decline in construction for rental units is stimulating demand for condos. The report estimates that half of new condos in the Toronto area are purchased by investors, and about 22 per cent are rented.

The one exception to the sanguine view appears to be Vancouver and parts of British Columbia, where home prices and demand from an influx of non-resident Chinese investment is elevating prices and construction. Home prices in Vancouver have climbed 159 per cent over the past 10 years, more than 50 per cent higher than the national average.

“Bottom line is, we expect the Canadian housing market to cool down rather than bust over the next couple of years, with the possible exception of Vancouver and parts of B.C. which will likely experience further correction,” Mr. Guatieri said in an interview. By cooling, he predicted that prices, sales and startups will essentially be flat this year and likely next.

Housing has become an area of concern for policy makers over the past few years as Canadians continued to dip into the mortgage market to take advantage of historically low interest rates. As a consequence, household debt to disposable income has shot to more than 153 per cent, the highest ever and close to the levels reached in the United States before the subprime crash.

Earlier in the month, Finance Minister Jim Flaherty said he was prepared to intervene for the fourth time in six years if there is no let-up in borrowing.

The BMO economists say the government and Bank of Montreal are correct to worry about a continuation of the trend, but that is not likely. In fact, except for a few hot spots, that cooling trend has already begun with prices rising only 0.9 per cent last year. Home starts have also dipped well south of the over 200,000 level. Nor is it likely that Canada will fall into another recession, or that interest rates would rise so quickly that a significant number of households would be unable to meet mortgage payments.

Canadian households are not as vulnerable as their American counterparts, the economists say. Canadian home ownership equity is 67 per cent in Canada, compared with 39 per cent in the U.S., and even debt-to-income ratios are far better in Canada when the cost of health care that U.S. households must pay is factored in.

The report argues that many of the measures used by alarmists to suggest housing is due for a severe correction are exaggerated or simplistic. On the important measures that gauge affordability, households are on firm ground. House prices to family incomes are elevated from 10 years ago, but not excessively so, at a ratio of 4.9 versus 3.2 a decade ago.

The exception again is Vancouver at 10, nearly double what it was a decade ago. Also elevated is Toronto at 6.7 versus 4.3. “Let's assume the worst case scenario and house prices fall by 10 per cent, would that affect anything?” Mr. Guatieri asked. “There has been such an increase in house values, that I don't think it would pose a serious problem for Canadians or the economy.”

Mr. Guatieri said the situation would become a problem if home prices and household debt continued to outstrip income growth, but trends on both fronts are moderating. (Source: The Globe and Mail)

Both record highs and near-record lows were recorded in the GTA new-home market in 2011. But what will 2012 bring?

The Building Industry and Land Development Association (BILD) and market research firm RealNet Canada met recently to discuss the final GTA market results for 2011, reporting 28,466 new high-rise units sold last year. That makes 2011 a record year for the Toronto condo market, up 23% from 2010. New low-rise sales set records for other reasons: With just 17,460 new-home low-rise sales throughout the GTA — due to a lack of inventory — 2011 was the third-lowest year over the past 12 in that category. RealNet reported 45,926 new houses (worth about $22 billion) sold in 2011 throughout the GTA — the second-highest year ever.

That means high-rise sales made up 62% of new-home sales in 2011. It’s a shift: According to RealNet, in 2000 only 25% of new home sales were high-rise. We can expect movement in the same direction through 2012, says George Carras, president of RealNet Canada. “The trend will likely continue,” he said. “Based on where inventories are, you should see a continued market-share increase on high-rise.”

While Mr. Carras won’t make further predictions, he’s confirmed 41 new condominium projects scheduled for release in the first six months of 2012. While more sites may make it to the market by June, it compares with 60 new high-rise sites released through the GTA in the first six months of 2011. Yet it’s hard to know what that means for the 2012 high-rise market. Ben Myers, editor of market research firm Urbanation, suggests 2012 will likely be slower than 2011, but not by much.

“It will still likely be close to the top three years ever,” he says, citing Urbanation data. “So 2007 saw 22,500 sales — the second-highest year ever. And 2010 was at 20,500 — that’s now the third highest. I’m expecting [2012] to be somewhere close to the numbers for 2010.”

With about 42,000 high-rise units under construction, is there a risk of flooding the market once those suites are built? It’s hard to say, Mr. Myers says, but so far he doesn’t think so. “We have about 18,000 units that will register this year, but we’re still in a seller’s market in the resale market, we’re still very much in a renter’s market in the condo rental market,” he says. “Those are both very positive. When we start to see a bunch of listings lagging and, in the resale market see people unable to rent their units, those will be the warning signs.” (Source: National Post)

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Greater Toronto REALTORS reported the leasing of 4,664 condominium apartments during the September to December 2011 period – up two per cent from the 4,563 units leased during the same time-frame in 2010. While the number of transactions was up, the number of apartments listed for rent through TorontoMLS during the last four months of 2011 dropped by seven per cent compared to the same period in 2010.

Average condominium apartment rents for one-bedroom and two-bedroom apartments rented during the September through December 2011 period increased by four and five per cent respectively in comparison to the same period in 2010. “The number of renters looking for apartments with modern finishes and amenities has steadily increased. The main source for these types of units has been investor-held condominium apartments. As renters have flocked to this segment of the rental market, upward pressure on rents has increased,” said Jason Mercer, TREB’s Senior Manager of Market Analysis. (Source: Toronto Real Estate Board)