Revealing the Truth about Canada’s Housing Market

Where is Canada’s housing market really headed? Some people say “boom,” while others declare “bust.” One individual that has a firm grasp on what the future may hold for the new home industry and the country’s real estate market is Ben Myers, Senior VP, Market Research & Analytics at Fortress Real Developments.

Myers released his Market Manuscript, offering a true look at the real estate market, addressing concerns about oversupply, a condo bust, the rising price of single-detached homes, and much more. The Manuscript focuses primarily on Toronto CMA, as well as Ottawa, Winnipeg, Calgary, and Edmonton; cities that are on the rise, according to Myers’ data.

We had the opportunity to briefly interview Myers about the Market Manuscript. See below for the interview and click here to read the full report.

Ben Myers

Canadian housing starts are trending lower than the 10-year and 50-year averages. Looking down the road to 2015, what does this mean for the country's new home supply?

I think the slowdown in starts in 2013 and 2014 was welcomed given the constant talk of oversupply in the market following extremely strong activity in 2012. Based on several forecasts, 2015 should be a strong year for starts with the Altus Group calling for 195,000 next year. The Market Manuscript includes nine forecasts for 2014 starts activity from the top sources in the country.

Builders are predicting that the average price of a single-detached home will continue to rise. What's your best estimate for what the average price will be for a detached home at this time next year?

Nationally?,? I would expect single-detached house prices to increase by 3% to 4%. In the Toronto CMA, I expect price growth to be much greater, likely in the neighbourhood of 7% to 8% based on a lack of supply and the trend of developers focusing on much larger single-detached house sizes. The Market Manuscript report indicated in the inner suburbs (the inner ring of the ‘905 area) had the average size of a new single-detached house increase from 2,700 square feet to 3,500 over the past three years. My estimate for the Toronto CMA overall would be an average price of $875,000 for a new single-detached home in 2015, with the inner suburbs seeing pricing swell to $1.1 million.

There seems to be many new communities popping up every week. Is there really a lack of available land in Toronto CMA?

In 2002?,? there were nearly 14,000 unsold ground-oriented (single-detached, semi-detached and row) houses in new communities in the GTA according to RealNet Canada Inc. That has decreased to under 6,700 as of August 2014 (a decline of 11% year-over-year). Although there are several new low-rise projects, they are much smaller than they were before in terms of total units. A good measure to determine if an area is over or under supplied is pricing, which has increased almost every year for over a decade. In addition, a good measure of the supply/demand dynamic in an area is the level of completed and unabsorbed supply, which is under 400 units as of the midpoint of the year. That figure had been over 800 for the early 2000s when the market was more heavily supplied, but that was still a low number. A figure showing completed and unabsorbed supply for the Toronto CMA is located in the Market Manuscript.

Why is condo and apartment construction taking twice as long as it used to?

The average apartment has doubled in size over the past decade based on data from Urbanation Inc. from 130 units to 260 units. These are also contributing factors: condo sites are tighter, developers are going farther underground?, buildings are taller, construction financing is more complicated and takes longer, there are more customized suites, there are more units and smaller units (meaning more kitchens & bathrooms to build, more paperwork) and there is a finite number of construction companies to build all these projects.

Will condos continue to boom in Toronto CMA? If so, which neighbourhoods will be the best investments?  

Downtown Toronto continues to be the ideal place to invest, it has the best appreciation over the past 10 years, despite doubling in size (by units) during that time. Based on 10-years of data, after the Core, these are the areas to look at (in order of desirability) Downtown East, Downtown West, The Village, North Midtown, The Entertainment District, CityPlace and the Harbourfront. We will be launch?ing projects in five of those districts over the next two years.

Will any other home types make a significant impact in 2015? What's your opinion on stacked townhomes?

Outside of Brampton, semis are pretty much non-existent. The supply of single-detached homes will continue to dwindle in the inner suburbs, and condominiums will be popular in Toronto, with mid-rise 905 projects doing well next year. Stacked townhouses will also sell well in 2015 for buyers that can’t afford to get into the low-rise market and no longer want to be in a high-rise, ?want a large ?space without the large maintenance fee, and also desire their own front door. We are excited to be bring to the market one of the first “high-style” stacked townhouse projects with Treehouse by Symmetry Developments in Toronto. We are also bullish on back-to-back townhouses, which is less dense than a stacked community and are popular with suburban first-time buyers – look for projects in Burlington and Vaughan from Fortress next year.

Lotus Condos

If you were investing in Toronto CMA, what neighbourhood would you buy in, what type of home would it be, and why?

I’d be inclined to buy in the new City of Toronto, smaller condominium apartment projects under 300 units that are close to transit and active neighbourhoods. I love the Bathurst and Queen area (great boutique shops and my tailor is there too!) so I would invest at Harlowe by Lamb Development Group (feature image) or I would buy at our future condo with Carlyle Communities in the Entertainment District, as the rental market there is very strong. Our Lotus project is launching in Bayview Village, across from the mall and literally 20 feet from the subway entrance, nothing better for ?residents than that.

The Market Manuscript shows that land values in the inner suburbs are going through the roof, if you were buying for personal use, I might target Richmond Hill for a low-rise townhouse or single-detached. We are launching Towns on Hall with LiVante Developments in Richmond Hill’s historic downtown area next year.

You focus on Ottawa, Calgary, Edmonton, and Winnipeg in your report. If you were to invest in one of these cities, which one would it be, what would you buy, and why?

I’d invest in Winnipeg, they are still getting used to buying pre-construction condominiums and as such, the pricing at our SkyCity Centre project will cost ?significantly less to drive leads pre-construction. When that project is built, it will be the signature condominium project in the province and I believe the value growth for the suite will be very high. There are millions of dollars being invested in Winnipeg’s downtown and new life has been brought to the streets with the return of the Winnipeg Jets and efforts to improve the area by a government sponsored group called CentreVenture.

SkyCity Centre

What would a well rounded 2015 look like for the Toronto CMA new home market with regards to sales, starts, and prices?  

In my ideal world, we sell 30,000 units (12,000 low-rise and 18,000 high-rise) in the Toronto CMA in 2014, we start construction on 35,000 units (including rental) and pricing increases? 3% to 4%. The closer we are to sustainable and long-term trends, the fewer bubble or crash articles get written and less people are influenced by sensational reports by analysts that don’t cover the market on a regular basis.