OTTAWA — The parliamentary budget officer says Canada would need to build 1.3 million additional homes by 2030 to eliminate the country's housing gap.

The newly released report looks at how many more homes would need to be built restore Canada's vacancy rate to the historical average. 

The report by Yves Giroux's office also accounts for the number of additional households that would form if sufficient housing were available. 

Based on those benchmarks, the PBO estimates that Canada would need to build 181,000 more homes a year than it currently does. 

The Canadian Mortgage and Housing Corp. says Canada needs to build 3.5 million more homes by 2030 to restore affordability to 2003-04 levels.

Giroux says his estimate is much lower than that of the CMHC because he looked solely at closing the gap between demand and supply. 

The Liberal government has made a string of housing announcements ahead of the federal budget, largely aimed at increasing housing supply. 

The proposed measures include billions of dollars in low-cost loans to spur more rental construction, as well as infrastructure funding for provinces and municipalities. 

The government is trying to win back favour with young voters who are increasingly pessimistic about their homeownership prospects and are facing skyrocketing rental costs. 

This report by The Canadian Press was first published April 11, 2024.

Nojoud Al Mallees, The Canadian Press

The rapid escalation in housing prices has disadvantaged millennials who started their working lives with wages that failed to meet housing affordability thresholds, but they are increasingly leveraging digital solutions to compete in tight markets.

A recent commentary noted that “millennials have aged into the housing market at the worst possible time.” Rising home prices and the persistent imbalance between supply and demand have frustrated millennials who typically lose bidding wars to older, wealthier buyers.

But not all is lost for the millennials. Historically low-interest rates imply that their monthly mortgage costs will be relatively affordable despite the higher purchase prices. Unlike older cohorts, much of their mortgage payments will not be consumed by interest payments.

The digitization of the real estate sector, with the internet enabling digital marketplaces for listing homes, applying for mortgages, paying for services and more, has also benefitted millennials because they are more likely to readily adopt digital solutions.

An Ipsos survey last year for the Ontario Real Estate Association showed that 45 per cent of Ontarians reported their first step in homebuying was searching online for homes, and six per cent started by visiting online open houses. Only 14 per cent indicated they started by contacting a real estate agent.

© Provided by Financial Post

The most consulted source for information was Realtor.ca, a web portal associated with the Canadian Real Estate Association, which recorded a whopping 516 million visits by 111 million visitors in 2021. But younger buyers are more likely than others to consult kijiji.ca and zillow.ca.

More real estate portals have recently emerged in Canada. For example, Zolo is a Canadian digital real estate platform that registered 165 million visits to its websites and more than 887 million page views. Zolo has 300,000 users every day and around 40 per cent of those visitors are between the ages of 18 and 34 years, while another 25 per cent are 35 to 44 years old.

Women homebuyers are adopting digital solutions at an increasing rate, too. Zolo reported that women outnumber men in daily visits to their portal, accounting for 53 per cent of the visits.

The pandemic has altered the locational priorities of homebuyers, including millennials. Buyers, in general, are searching for homes with more living space and backyards, while millennials, being cognizant of the increased opportunity to work from home, searched for dwellings in areas with fast and reliable internet. Almost one in four Ontario millennials expressed a preference for homes in places with better internet service compared to just nine per cent of those aged 55 years or older.

Furthermore, most older buyers indicated a preference for small cities and towns, whereas those aged 18 to 34 generally preferred suburban abodes. Ontarians said their search radius for new dwellings in 2021 expanded to 165 kilometres of their current residence, from just 36 kilometres in 2020.

The internet has also become the place to search for a realtor. Almost 88 per cent of those looking for information on an agent consulted social media or broker/franchise websites. But those 55 and older were much less likely to rely on digital platforms to find a realtor.

A 2017 survey by NAR revealed that 99 per cent of U.S. millennials used the internet to find homebuying information. This is twice the rate for baby boomers. The digital-first generation is comfortable searching for information, communicating and negotiating with service providers online. For example, millennials obtained twice as many mortgage quotes as baby boomers.

Technology will enable more competition among service providers and better choices for consumers. Millennials are technology native, so they should use it to compete in the real estate markets where odds are stacked against them.

Murtaza Haider Professor of Real Estate Management at Ryerson University

Stephen Moranis real estate industry veteran

BMO Financial Group says recent changes to mortgage stress test rules and the cooling of prices and sales in some regions may moderate the country’s housing market.

“We can assume, just given what we’re seeing right now in housing prices and sales, that there will be some moderation,” Erminia Johannson, BMO’s group head of North American personal and business banking told analysts on Wednesday.

“But it will still remain a fairly robust mortgage market in Canada, for sure, over the next little while.”

Johannson made the comments as BMO beat expectations, reporting its second-quarter profit nearly doubled compared with a year ago when the amount it set aside for bad loans soared at the start of the pandemic.

The new mortgage stress rules come into effect on June 1. They will set the qualifying rate on uninsured mortgages at either two percentage points above the contract rate, or 5.25 per cent, whichever is greater.

The change is aimed at taking the heat off real estate markets like Toronto and Vancouver, where bidding wars, soaring prices and a flurry of sales were the norm during the COVID-19 pandemic.

While real estate boards in hot markets have reported sales are slowing and prices are coming down, many prospective homebuyers remain priced out of popular markets.

Predicting what impact the new test will have is difficult, but when coupled with a drop in some area’s home prices, Johannson believes it could push buyers to seek more affordable housing or turn to parents for help.

BMO is already preparing for what might happen with the new test, BMO’s chief risk officer said.

“We’re routing more mortgages to manual adjudication particularly where…we’ve seen rapid house price appreciation, just to make sure that we’re comfortable,” Patrick Cronin said during the same conference call.

BMO chief executive Darryl White said the pandemic has brought challenges unlike any the bank faced before, and that will have impacts for some time to come.

“We have grown stronger, underpinned by our purpose-driven strategy and the culture that will help drive a sustainable and inclusive recovery,” White said.

In its quarter ended April 30, BMO earned $1.3 billion in net income or $1.91 per share, up from $689 million or $1.00 per share a year ago.

The increase came as BMO’s total provision for credit losses fell to $60 million in its latest quarter compared with $1.1 billion in the same quarter last year when the pandemic brought the economy to a halt.

Revenue for the quarter totalled nearly $6.1 billion, up from almost $5.3 billion a year ago. 

On an adjusted basis, BMO said it earned nearly $2.1 billion or $3.13 per share for the quarter, up from an adjusted profit of $715 million or $1.04 per share a year ago.

Analysts on average had expected an adjusted profit of $2.77 per share for the quarter, according to financial data firm Refinitiv.

Last month, BMO announced a deal to sell its asset management business in Europe, the Middle East and Africa (EMEA) to Ameriprise Financial Inc. for $1.09 billion.

BMO was the first of Canada’s big banks to report its second-quarter results.

Canadian Imperial Bank of Commerce, Royal Bank of Canada and TD Bank Group will report Thursday, followed by National Bank of Canada on Friday. Bank of Nova Scotia will share its figures next week.

Metro Vancouver housing prices will continue to rise after the COVID-19 pandemic, creating a drag on sales growth as homebuyers’ budgets shrink, according to the Canada Mortgage Housing Corp.’s spring outlook Thursday.

CMHC senior analyst Braden Batch predicted that Metro’s housing market will face the same housing affordability and supply-shortage challenges that existed pre-pandemic.

He said demand for housing in Vancouver last year went in two different directions: demand for home ownership expanded, and demand for rental housing receded.

The COVID-19 lockdown resulted in a major decline in the typical flow of migrants into the Vancouver region, especially very young adults and students, while lower mortgage rates triggered a burst of move-up and first-time buyers entering a market that was already experiencing dwindling inventories before 2020, added Batch.

“Vancouver’s housing market will adjust to reopening borders and development in fundamentals over the next three years,” said Batch in the report. “Buyers will face higher prices and see their budgets decline, while a flow of newcomers will place pressure on the rental market. In essence, the market will face the same sorts of affordability and housing shortage challenges that pre-existed the shock of COVID-19.”

Sales increased because more people had the budget to buy a house. However, he noted that once prices adjust, higher budgets will be required.

“In effect, first-time buyers must save a higher down payment even if they can carry a larger loan, and somewhere in the chain, move-up buyers require first-time buyers to unlock a down payment for their next home. Thus, once the pool of potential buyers with ready down payments is exhausted, higher prices will act as a drag on housing demand, and this will result in a contraction of sales activity,” he said in the report.

Sales will remain elevated into 2021 but will contract thereafter, he added.

Meantime, demand and price momentum in Victoria will extend into 2021, driven by low borrowing costs and renewed demand from out-of-town buyers and newcomers, before stabilizing by 2023, according to CMHC senior analyst Pershing Sun.

She said resale activities will continue to increase in 2021 before declining by 2023 as a result of slowly rising borrowing costs. Sun also noted, in the report, that prices will grow, but at a progressively slower pace over the next three years as competition among buyers tapers off.

Overall, the report forecasts that economic activity in Canada, as well as employment and net migration, will gradually return to pre-COVID levels over the 2021-to-’23 period, as broad immunity to COVID-19 takes hold and restrictions are lifted.

One third of BC residents live in a strata home, whether it’s a condo, townhouse, or multi-plex unit.

Strata homes are usually more affordable than their single-family counterparts. They can also lessen the burdens of home ownership, with strata residents sharing responsibilities for things like maintenance, snow shoveling, and security. And while these homes tend to be smaller, they may also have access to amenities like a pool or gym. 

Metro Vancouver’s real estate market has been picking up steam since last fall, culminating in record sales and new listing activity last month. In an active market like this, seeking professional advice from a REALTOR® is more important than ever.

With this in mind, the Real Estate Council of BC (Council) and the Office of the Superintendent of Real Estate (OSRE) released a joint statement advising home buyers and sellers to seek professional advice, do their research, and understand the risks involved before buying or selling a home.

Tony Gioventu doesn’t like referring to surging insurance costs facing B.C. strata corporations and condo owners as a perfect storm.

“It’s a bad description,” said the executive director of the Condominium Home Owners Association of BC.

Instead, Gioventu said a series of factors – many of which are global – have been compounding since late 2019 to create what he describes as a “nasty little storm” for British Columbians.

A February report from LowestRates.ca, which allows users to compare insurance, mortgage, credit card and loan rates, revealed condo insurance premiums in B.C. increased 18% between 2019’s fourth quarter and 2020’s fourth quarter.

According to LowestRates.ca’s estimates, about half of British Columbians live in strata housing, which can cover everything from condos to townhouses (the provinces pegs it closer to just under one-third of the population).

A December 2020 BC Financial Services Authority report described the state of the strata market as “unhealthy” and cautioned that the market is not expected to improve in the near future.

“What the public needs to understand is that when they go to their insurance broker, they are not purchasing insurance through an insurance provider who is likely located in British Columbia,” Gioventu said. “They are worldwide insurance providers, so all of their risks, all their capacity and what they’re willing to accept for a liability is based upon global risks and global costs.”

Over the past few years the number insurers offering coverage has shrunk, meaning less competition in the industry.

Meanwhile, the macroeconomic impacts of the pandemic have also played a part over the past year with central banks cutting overnight rates to record lows.

“Borrowing rates were low, so were investment rates. And in a portion of reserves by the insurance companies, a portion of their profits are raised through investments,” Gioventu said.

“They’re not speculative in the same way. So even things like financial returns for the insurance industry were substantially lower than anticipated. You compound that with incredibly rapid-growing housing prices both for sale, and for construction and reconstruction, and the insurance industries themselves were taking on a lot more liability and risk.”

The added risk of earthquakes on the West Coast and the possibility of “catastrophic costs” that go with that have only exacerbated the issue, he added. 

Five years ago, a strata corporation for a highrise condo building in B.C. might be on the hook for around $500 annually per unit for insurance costs, according to Gioventu.

Nowadays, he ballparks that figure at upwards of $1,400 to $1,500 annually per unit.

“The vulnerability of free-market insurance is that it is really at the mercy of the worldwide insurance providers and the reinsurers who are essentially securing the risks that we may be exposed to.” 

But Gioventu added that there is some hope the market will stabilize.

Last year, the B.C. government introduced changes to the industry, such as requiring that brokers disclose the amount of their commissions (rates can run from 18% to 22%) to facilitate better negotiations, ending referral fees between insurance brokers and strata property managers and requiring insurers provide strata corporations with at least 45 days’ notice of material changes and renewal of policies.

In the BCFSA’s December report, it estimated it might take three to five years before premiums will adjust significantly.

“It has driven a bit of a wake-up call to our insurance industry, to government on policy,” Gioventu said. “And we’re now seeing changes in legislation, we’re seeing voluntary changes in the regulations for financial services for insurance companies. We’re seeing strata corporations being more proactive about their risk management.”

By Tyler Orton | April 22, 2021, 12:00pm

torton@biv.com

@reporton

VANCOUVER -- The province announced the "first steps" of its plan to address B.C.'s rising strata insurance rates Tuesday morning.

The changes are meant to bring transparency to the industry, close loopholes surrounding depreciation reports and help strata owners and corporations more information when it comes to making decisions, the province says.

Rising strata insurance rates are a major financial pressure during what is an already challenging time, Finance Minister Carole James said.

"This is an extremely complex issue playing out in the private insurance industry, but that doesn't lessen our government's commitment to doing what we can to make the situation better," James said.

She said the province first became aware of "significant shifts" in insurance premiums late last year, that went "well beyond any kind of normal market corrections."

Following the first phase of an examination into the industry, James said the reasons for the "skyrocketing" prices are complicated, but the results are not.

"The current situation is unacceptable, and there is no quick fix for this problem," she said.

Announcing the initial steps in a plan to address that problem, James said the NDP government will be looking to amend the Strata Property Act and Financial Institutions Act.

Legislation tabled Tuesday includes a prohibition of referral fees between insurers or brokers and property managers, or other third parties.

B.C.'s finance and housing ministers said the changes will set clear guidelines for what strata corporations are required to do to help condo boards make informed decisions about insurance.

Corporations will also be required to let owners know about insurance coverage, provide notice of policy changes, and let stratas use their contingency reserve fund (CRF) to pay for unexpected increases, if needed.

And ministers James and Selina Robinson claim the amendments will protect owners against lawsuits from strata corporations if they are legally responsible for loss or damage, "but through no fault of their own."

The ministry says these four changes will lead to further updates to B.C.'s regulations:

•  identifying when strats are not required to have full insurance coverage;
•  strengthening depreciation reporting requirements (including a limit to use of loopholes to avoid these reports);
•  changing the minimum required contributions made by owners and developers to the CRF;
•  strengthening notification requirements of changes to insurance coverage and costs; and
•  requiring brokers to disclose their commission.

The ministry says those commissions have been reported to be higher than 20 per cent in some cases.

The above list of changes won't be implemented until the province has consulted with strata community stakeholders, the ministers said.

Among the groups being asked to weigh in are the Condominium Home Owners Association of B.C., Insurance Brokers Association of B.C., Insurance Bureau of Canada, Real Estate Council of B.C. and the B.C. Real Estate Association.

An interim report from the B.C. Financial Services Authority, which described the province's strata insurance market as "unhealthy" will also be considered in the consultation period. That report, which was completed at the direction of the finance minister, can be read online.

A final version is expected in the fall.

More than 1.5 million British Columbians live in strata housing, the province said.

When it comes to what exactly is behind the increased premiums, the BCFSA says it's a combination of provincial, national and global factors ranging from property value to earthquake risk.

Written by Kendra Mangione 
Producer, CTVNewsVancouver.ca

The British Columbia Real Estate Association estimates that economic growth will remain strong enough to support a boost in sales next year after a substantial decline in 2018, according to its latest forecast.

When the dust settles at the end of this year, association chief economist Cameron Muir expects sales recorded through the Multiple Listing Service will have fallen 23 per cent to 80,000 transactions, compared with 103,768 in 2017.

“However, continuing strong performance in the economy combined with favourable demographics is expected to push home sales above their 10-year average in 2019,” Muir said Thursday in releasing the forecast.

Province wide, Muir’s forecast is for sales to rise 12 per cent to almost 90,000 units, but with a record number of new homes under construction and high levels of inventory, home prices will be more in keeping with inflation.

In Metro Vancouver, that is likely to mean sales in the region covered by the Real Estate Board of Greater Vancouver bouncing back to 31,400 transactions in 2019 and average prices edging up 2.9 per cent to almost $1.1 million.

“Overall, we anticipate MLS sales to trough in 2018 and see some recovery in 2019 (and 2020),” according to the CMHC forecast, “while average prices will see a relatively flat growth profile with some risk of decline as demand and supply find a new balance.”

In the Lower Mainland regions as defined by the Fraser Valley and Greater Vancouver real estate boards, the CMHC forecast estimates that while economic conditions are still favourable, slowing population and employment growth have cut into housing demand.

The region covered by the CMHC’s forecast takes in submarkets of both the Real Estate Board of Greater Vancouver and Fraser Valley board and in its estimation, the area will likely see higher sales, but faces the likelihood that prices will decline further.

“This reality, when combined with housing policy changes from all levels of government, has resulted in an evolution of short-to-medium-term home price expectations,” according to the forecast, “compared with where they were one to two years ago.”

DERRICK PENNER
Postmedia