The latest in mortgage news: record population growth to keep upward pressure on home prices
Canada’s expected population growth will worsen the already limited housing supply and result in even higher home prices, according to a new report by Zoocasa.
The report analyzed historical population growth together with home price data and found that national home price growth exceeded population growth by “more than double or triple” in most years in 14 out of the past 18 years.
“…the more people who live in Canada, the more homes are needed, which will exacerbate the already limited supply of homes,” the report notes. “In that sense, the population does have an impact on the national average price because demand will increasingly continue to outweigh supply.”
It pointed out that Canada welcomed 437,180 immigrants in 2022—the largest number in Canadian history for a single year, according to Immigration, Refugees and Citizenship Canada. “At the same time, the national average home price soared to a monthly high of $804,900—a 31% increase from 2021,” the report noted.
Significant home price decline “unlikely”
With the country expected to take in over 465,000 new immigrants annually, rising to over 500,000 by 2025, the Zoocasa report predicts continued housing supply pressure in the coming years, which will apply upward pressure to home prices.
“Home price growth and population growth have simultaneously trended upwards and this is likely to continue at an even faster rate in the future,” the report says. “Based on the previous five years, home prices have grown unprecedentedly quickly, and though prices have levelled off from 2022, a significant downward trend is unlikely.”
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$175k household income needed to afford a 1,500-sq-ft home in Ontario, report finds
A household income of more than $175,000 is needed to afford an average 1,500-square-foot home in Ontario, a new report has found.
Not surprisingly, the hellosafereport says Toronto remains the province’s most expensive city, requiring a gross annual household income of $591,828 to afford a comparable-sized home. That works out to a price of roughly $1,400 per square foot.
That’s more than seven times the income needed in the most affordable market, which is Timmins, where a household income of just $64,896 would be required, or $203 per square foot.
Other high-priced communities requiring unrealistic household incomes include Halton Hills ($570,154), Aurora ($519,838) and Richmond Hill ($511,235).
Canadian housing starts surge in June
Construction began on a record number of housing units in June, reversing a downward trend seen in recent months.
The Canada Mortgage and Housing Corporation (CMHC) reports that new starts totalled 281,373 units in the month, up from just over 200,000 in May. This marked the largest monthly increase in a decade.
The increase was led by new multi-unit starts, which were up 59% month-over-month. Single-family starts, on the other hand, were up a more modest 42,900 units, or 3% from May.
But economists point out that one month does not make a trend, particularly for an indicator like housing starts, which can be volatile from month to month.
“June represented a strong month for housing starts, but one month is not enough to turn around the long-running downward trend in the sector,” noted TD economist Marc Ercolao.
The six-month average of starts, a more indicative measure of overall trends, rose to 234,974 units, up 2.4% from the previous month.
“This burst should be short-lived and, as high interest rates continue to work through the economy, home-building will be a drag on residential investment in the coming quarters,” Ercolao added.
EQ Bank launches its no-fee FHSA Savings Account
EQ Bank this week unveiled its Tax-Free First Home Savings Account (FHSA) for prospective homebuyers.
EQ Banks says its FHSA is the country’s first “fully digital, no-fee” FHSA Savings Account, and says it is offering the best interest rate nationwide at 3.00%.
First home savings accounts are relatively new, having only been available to prospective homebuyers as of this spring.
The new registered plan, which was first introduced in the federal government’s 2022 budget, allows first-time homebuyers to save up to $40,000 for the down payment on their home on a tax-free basis. Similar to the Tax-Free Savings Account (TFSA), funds in the account can be placed in a variety of investment vehicles, and can then be withdrawn tax-free as long as the funds are used for a qualifying first-home purchase.
Although the government promoted the accounts as being available as of April 1, 2023, many of the country’s largest banks weren’t in a position to offer the accounts right away due to the logistics of getting them up and running and while they awaited guidance from the Canada Revenue Agency.
National Bank was one of the first big banks to make the FHSA available to clients in late April.
“True to our ‘less take, more make’ brand promise, we believe we’ve launched the best FHSA product in the market,” said Mahima Poddar, Group Head, Personal Banking at Equitable Bank. “We’ve always challenged the status quo in Canadian banking and we wanted to do it again with our FHSA—with flexible no-fee savings options, industry-leading rates, and an easy digital experience, all of which allow Canadians to reach home ownership faster.”