The Canada Mortgage and Housing Corporation (CMHC) recently reported that Ottawa’s “population-adjusted construction is at its lowest level in nearly 10 years.” A City of Ottawa progress report shows that Ottawa is only at 22 per cent of its annual housing target at the end of August.  

The Ottawa Real Estate Board (OREB) reported a healthy increase in home sales for September, with 1,047 units — a rise of 11.4 per cent from the same time in 2023. However, sales remain below historical averages, coming in 17.4 per cent below the five-year average and 15.4 per cent below the 10-year average for September.

Year-to-date, home sales reached 10,485 units, representing a 6.4 per cent increase compared to September 2023.

Healthy fall outlook with chronic supply issue — ‘not building enough of the right homes to address the ‘missing middle’’

“As we navigate a shifting housing market, Ottawa’s fall outlook is healthy,” says OREB president Curtis Fillier. “Activity is robust with an uptick in sales and prices remaining steady. Meanwhile, both buyers and sellers are rethinking their purchasing power amid news about additional interest rate cuts on the horizon, longer amortizations and increased price caps for insured mortgages.”

Fillier goes on to explain that recent policy developments to stimulate demand have been encouraging, though the Ottawa market doesn’t typically experience issues with demand. Rather, “We have chronic supply issues,” he notes. “We’re not building enough homes in the city, and we’re not building enough of the right homes to address the ‘missing middle.’”  

Price trends

The overall MLS Home Price Index (HPI) composite benchmark price for September was $642,800, a slight increase of 0.2 per cent from September 2023.

Single-family homes saw a benchmark price of $729,000, up 0.5 per cent year-over-year, townhouses/row units experienced a 1.7 per cent decline with a benchmark price of $500,000 and apartments had a benchmark price of $414,200, down 1.3 per cent year-over-year.

Inventory and new listings

September’s new listings totalled 2,343 units, a 3.9 per cent increase from the year prior. This was 4.7 per cent above the five-year average and 11.6 per cent higher than the 10-year average.

Active listings rose to 3,529 units, marking a 16.9 per cent year-over-year increase and sitting 43.3 per cent above the five-year average. Months of inventory rose slightly to 3.4 months, up from 3.2 months in September 2023, indicating a slightly more balanced market.

Review the full report here.

It’s no surprise Toronto’s housing market is reaching critical levels as the rising cost of living, high rental rates, a shortage of construction workers and the city’s growing population are exacerbating the imbalance between supply and demand.

Toronto is experiencing a surge in condominium listings, but few highlight that the suites are primarily small and not fit for family living. According to the Toronto Regional Real Estate Board (TRREB)’s June 2024 market watch data, listings for units in the 500- to 599-square-foot range soared by 50 per cent compared to last year.

Are Torontonians being heard?

Unfortunately, family-sized condominiums make up only about 10 per cent of the market, despite a growing and pressing demand from families. This shortage of larger, multi-bedroom suites designed for families and multigenerational living leaves many buyers, particularly those seeking homes that accommodate extended families, underserved and frustrated. This begs the question: when it comes to housing supply, are Torontonians being heard?

In April, we conducted a survey with members of the Angus Reid forum to capture what Torontonians are feeling about Toronto condominiums, and the results were illuminating. Almost half of respondents (47 per cent) see the potential for condominiums to be their long-term homes, and this statement is echoed strongly by current condominium dwellers, with 71 per cent expressing confidence in condominium living.

However, despite the increase in positive outlook, a staggering 93 per cent of respondents believe that Toronto needs better-built condominiums that suit people’s lifestyle needs, and nearly four in five respondents think that most Toronto condominium units are poorly constructed, indicating dissatisfaction with the current landscape.

Market caters to a misguided notion of “investor” instead of “end-user” condominiums

For condominium developers like us, this disconnect between what’s available in the market and what Torontonians need and want is strikingly clear. For far too long the market has catered to a misguided notion of what “investor”-focused condominiums are, rather than “end-user” condominiums.

This belief has been that investor buyers are predominantly interested in smaller units.

We believe all condominiums should be end-user-focused, and by meeting the demands of end-users, they become a good investment as well. This notion of catering to investors has led the market with an overwhelming supply of small units that many do not deem as viable homes.

Understanding and responding to Torontonians’ housing needs

A home should inspire pride and satisfaction. It should not be a compromise driven by convenience. Torontonians need not settle for underwhelming condominium developments with small suite layouts and poor build quality. Developers need to listen and create homes that meet the real needs and aspirations of the people, rather than simply adding more shoebox units to Toronto’s already imbalanced housing stock.

All of this just scratches the surface of the issue. Beyond size alone, developers bear the responsibility to construct sustainable, high-quality homes that meet people’s expectations. Much of today’s condominium stock lacks the thoughtful architecture, quality and design necessary to make condominiums both a comfortable and enjoyable home for everyone.

We’ve all heard the same story from our friends who live in condominiums: “I can hear my neighbours,” “The wait time for the elevators is far too long,” and so on. It’s really no wonder that more than 34 per cent of Torontonians believe that owning a condominium is like owning a box in the sky, but it doesn’t have to be that way.

Liveability above all: Condominium developers need to keep quality at the core

The growing dissatisfaction among condominium owners suggests that we need to make a drastic change in what we’re building and how we’re building it.

Developers must shift their focus to quality and liveability. This means designing homes that people are proud to own and live in, with the space, comfort and amenities that support a high quality of life, creating sustainable, vertical urban environments for people of all ages and life stages. We need to build condominiums that make people want to live in Toronto and enjoy everything that our beautiful city has to offer.

Bridging the gap is a developer’s responsibility

Toronto’s housing crisis requires an approach that addresses both the quantity and quality of homes and developers have a crucial responsibility in this. The solution isn’t just about building more units; it’s about building the right kinds of homes.

Only by closing this gap between what’s available and what’s needed can we hope to resolve the crisis and create a city where everyone feels at home. 

Over a dozen developers across the Waterloo region have collaborated to advocate for policies and initiatives to facilitate new home construction across the region.

The new Build Urban group represents a collective voice championing efficient land use, responsible growth and streamlined approval processes. It will work closely with municipal governments and stakeholders in the hope of overcoming barriers to construction and expediting the creation of new homes across the region.

So far, this has included key policy issues, including inclusionary zoning and planning frameworks around major transit station areas, with key insights, expertise and practical solutions to affordable housing, intensification and land use planning in the consultation process.

”We are in a housing crisis and collaboration between local governments, the development industry and other stakeholders is necessary to accelerate the construction of new homes,” says Melissa Durrell, CEO of Durrell Communications and spokesperson for Build Urban.

“The development industry possesses invaluable insights into the challenges and opportunities on the ground. By working together, we can find tangible solutions that address the urgent need for housing across our region.” 

Expected population growth means changes needed to increase homes available for residents

The region’s 10-year housing target is 70,000 new homes by 2031, which will require an average of just over 7,500 annual housing starts in Kitchener, Cambridge and Waterloo for the next eight years.

However, the tri-city municipalities have under 4,800 housing starts reported in 2023. The group notes that Waterloo’s expected population growth to 923,000 by 2051 means changes are needed to increase the number of homes available for residents. 

“Addressing the housing crisis requires an all-hands-on-deck approach,” says Durrell. “Build Urban is committed to helping the region reach these housing targets, providing expertise, evidence-based policy recommendations and support to ensure the necessary homes are built to accommodate a growing population.”

Proptech Collective recently released its third annual Proptech in Canada report, which highlights the many startups and trends shaping the future of the real estate and construction industries.

Proptech is flourishing in Canada

Canada is not just establishing itself as a prominent North American tech hub, but it’s also emerging as a haven for real estate innovation, supported by attractive immigration policies, access to a robust talent pool and enhanced support for innovation programs.

In the last year alone, over 50 new startups have become part of the Proptech Collective database, bringing the total to 500 active proptech companies. Looking into startups across commercial real estate, residential real estate and construction tech sectors reveals the following highlights:

Hub concentration. Approximately 77 per cent of Canadian proptechs are located in five major hubs — Toronto, Vancouver, Montreal, Calgary and Kitchener-Waterloo — with nearly 46 per cent located within the Greater Toronto Area.

Startup evolution. A significant 75 per cent of Canadian proptech startups have been launched within the last decade; 40 per cent emerged in the past five years.

Financial milestones. Even in a challenging market environment, Canadian startups have collectively raised over $1.5 billion in funding since June 2022.

Industry segments. Residential real estate proptechs make up more than 40 per cent of all proptech startups across the country.

Significant newcomers to the space included Adaptis (circularity and decarbonization planning software), Chexy (rental rewards platform), Doormat (a modern lawyer for real estate transactions that real estate agents and clients benefit from on cost, efficiency and transparency), Wiseday (instant, digital mortgages) and Landslo (lead generation for mortgage and agents).

Navigating future trends

Four trends were clear from the conversations with entrepreneurs, real estate leaders and investors:

• Decarbonization. With a focus on sustainability, experts are prioritizing the integration of ESG (Environmental, Social and Governance) principles and data into the entire real estate value chain — from design through operation to demolition. Examples of areas include sustainable materials, grid stability and robotics aiming to reduce waste for offsite construction.
• Affordability. The widespread issue of affordable housing across Canada is spurring innovation. Examples include alternative financing and co-ownership models to enhance housing security, as well as opportunities where prefab and modular options allow for building faster and more sustainably.
• AI integration. Many of us are no strangers to artificial intelligence, and neither are real estate leaders. From leveraging AI for scenario analysis or even using tools like ChatGPT to automate conversations and listing promotions, there’s a growing consensus on the need for increased adoption of this technology in the industry.
• Integration and consolidation. Proptech’s evolution over the past decade has paved the way for consolidation and partnerships between different startups. Strategic collaborations are starting to allow for more holistic consumer experiences, for example in residential real estate, by integrating search, mortgage and closing processes into one platform.

Paving the path forward

While the last year has proved to be more challenging across the industry given rising interest rates, the need for digital solutions has not diminished.

The future promises not just growth but a transformation. Canada will remain a hub for real estate innovation, shaping a resilient and positive path for the real estate and construction industries. Visit proptechcollective.com to learn more about the Proptech in Canada 2023 report and Proptech Collective’s year-round work.

Real estate firm Engel & Völkers says mom-and-pop house flippers have entirely left the market, blaming rising costs from construction, interest rates, taxes and elevated housing prices.

Those costs, which have cumulatively escalated in recent years, have literally priced small investors out of a market that for years was thriving.

That’s left this particular aspect of the market in the hands of bigger players and developers. 

Much market uncertainty means more education needed

Andrew Carros, chief operating officer of Engel & Völkers Vancouver, says people today have to be more educated if they’re going to be house flippers because they’re taking a higher risk with the uncertainty in the market and the rising costs and taxes. “There’s a lot of uncertainty in our economy. There’s a lot of uncertainty in every market.”

Carros explains that, of course, the effects of COVID have changed people’s perspectives on what they’re looking for. “I think people made their lives a lot more personal but in Vancouver, in particular, we started noticing a real trend moving away from casual house flippers. We’re not talking about your developers here. We’re talking about people that are doing it as a hobby, or a way to make some extra income or do something fun with their family.”

Change with foreign buyers’ taxes

He notes the change happened when the foreign buyers’ taxes came into Vancouver in 2017. “There were opportunities in other cities, but if you look at Vancouver’s market we’re usually first in and first out when it comes to how the market trends.”

Carros continues, “When that happened, the manipulation from the government to try to force prices to come down obviously changed the tone of the economy quite drastically, and in Vancouver, I think the narrative that anything can happen really scared people, the casual consumer. 

A way to move on and up

He says that mom-and-pop house flipping was a nice way for people to live in a home for a few years, do a renovation and then move their family to another property by taking the assets from what they built in the flipped property to “keep moving forward and moving up in the market.”

“It’s stalled out a little bit, unfortunately,” says Carros. “In the last two years, we’ve noticed that shelter costs have gone way up, energy costs have gone way up, holding costs on interest rates have gone way up.”

The gap: Shrinking and unpredictable

A severe lack of inventory in the market has increased the prices of lower-end homes, Carros explains. This means the gap between what someone pays to purchase and renovate a home, and the higher price they get once it’s flipped isn’t big enough anymore when you consider all the rising costs. 

Plus, “The government has made it very clear that their mandate is to try to stop people from inflating the price of real estate, so they’ve come down hard on capital gains, flipping homes, taxes you have to pay when you come in and out,” he notes. 

“And I think the bigger, greater concern is that the predictability of what might happen in the time that you own that property to when you flip it is unknown. With elections, they just keep throwing out policies that are meant to help affordability but unfortunately, when we look at what’s happening, I don’t think it’s having its greatest effect.”

What makes a successful flipper today?

Carros says the first thing a potential house flipper needs is cash — and that’s the hardest thing for most people as they don’t have the money to put into a house project. If they’re borrowing, with interest rates elevated, it just becomes harder to do. 

To control costs, flippers must also be very organized. If people can put work into their own property, it helps with cost savings. They have to have a plan and target the areas that make sense to get the most on their return.

Patrice Grouleau, with Engel and Völkers in Montreal, adds that today’s flippers are the pros: professional builders navigating a market where hiring a general contractor can quickly eat into your profit margins.

Higher rates and uncertainty = fewer mom-and-pop flippers

Christopher Alexander, president of Re/Max Canada, says as soon as interest rates started going up, the market saw fewer and fewer mom-and-pop investors getting in, whether it was to acquire more for their portfolio or to start flipping.

“And it makes sense,” he notes. “Because a lot of times, people will buy a house whatever the cost is and then go out and borrow (money) to pay for the materials to do the flip. So when rates started rising, the margins on those projects got smaller and smaller,” he explains. 

In addition, he points out the uncertainty added to the mix. “It was hard to determine how long it would take for a property to sell or what price it would sell at, but for so long in much of the country you had pretty decent predictability. It’s impossible to have a crystal ball in this business, but there was a good chance if you bought a house today, fixed it up and renovated it, you could sell it for more tomorrow. That’s disappeared since the spring of 2022.”

Making a comeback in Calgary with economies of scale

Joel Semmens, a realtor with Re/Max Real Estate (Central) in Calgary, says the local market in the past decade has been fairly stagnant with house prices. 

“There just weren’t many people flipping houses because the market was declining; it was not on an incline. (Now), this is the type of market where you start seeing that kind of activity again because we’re in a buoyant, upwardly mobile trajectory of a market,” he explains.

Semmens is seeing groups of people working on multiple properties at once. “I see the guys that are like mom-and-pops in a way because they’ve got their whole family working for them, three to five at a time.” He notes, “They’re doing five (properties) at a time, so there’s an economy of scale in terms of getting the trades, and they pick the same stuff (for renovating the homes).”

Government deeming rule for flipped properties

The 2022 federal budget introduced a new deeming rule, effective January 1, 2023, for flipped residential properties, including rentals. The Government of Canada’s website says this is “to ensure that profits from the disposition of flipped property are taxed as business income” and “profits are subject to full income inclusion”. 

About the rules for reporting profits from flipping, it goes on to say: “The profit from property flipping is fully taxable as business income and does not qualify for the 50 per cent capital gains inclusion rate or the Principal Residence Exemption.”

Market dynamics and trends

Despite a 10 per cent decrease in the standalone monthly SAAR of total housing starts for all areas in Canada, dropping to 254,966 units in July from June’s 283,498 units, total SAAR housing starts for all areas in Canada managed to outpace the five-year average by 7.4 per cent.

Bob Dugan, CMHC’s chief economist, acknowledged the recent fluctuations: “Despite a decrease in the SAAR of housing starts relative to last month, July saw a healthy number of actual housing starts from a historical perspective. This pushed the trend of housing starts upward for the second consecutive month. Market intelligence suggests multi-unit projects started in June and July were likely financed a few months prior, so the effect of the most recent interest rate hikes on housing starts remains to be seen.”

Urban vs. rural

The urban sector experienced a more pronounced decline, with the monthly SAAR of total urban starts, covering centers with populations over 10,000, decreasing by 11 per cent in July, reaching 234,857 units. 

Multi-unit urban starts bore the brunt of this decline, falling 12 per cent to 193,446 units, while single-detached urban starts saw a milder contraction of 4.0 per cent, totaling 41,411 units.

In contrast, the rural starts monthly SAAR estimate stood at 20,109 units.

Regional variation

Geographically, the landscape of housing starts saw varying trends. The Vancouver and Toronto Census Metropolitan Areas (CMAs) observed declines in total SAAR housing starts, with Vancouver experiencing a 23 per cent drop and Toronto seeing a 29 per cent decrease, while the Montreal, Calgary and Edmonton CMAs defied the overall trend, recording respective increases of 12 per cent, 33 per cent, and 67 per cent in total SAAR housing starts.

An economist’s take

Katherine Judge, an economist at CIBC Economics, adds her insights to the discussion. She points out that while the pace of homebuilding cooled to 255,000 units in July, it still exceeded the consensus expectation of 244,000 units.

She adds, “Both single-family and multi-family housing starts weakened, and the decline was concentrated in Ontario and B.C., while other provinces generally saw building pick up. Still, the softer trend to building permits this year suggests that building will come under more pressure ahead, with demand being thwarted by high-interest rates.”