News: Toronto is Not Part of the Supply Construction Surge?

In this week's Industry News (Week of 20 Sep 2021).

There has never been more housing under construction in Canada — but [the] city that needs it most is missing the boom | Financial Post Housing starts over the past 12 months were at their strongest since 1977, but not in Toronto. Canada is in the midst of a record housing construction boom, but Toronto is notably absent from this surge, according to the Royal Bank of Canada. Canada has long wrestled with a housing supply shortage problem, but over the past year, it’s not for a lack of building. A report by the Royal Bank of Canada found that housing starts over the past 12 months were at their strongest since 1977 and the number of new housing units currently under construction is at an all-time high. In the past year, as many as 260,500 housing units began construction with their foundations poured, defining the housing start. The report added that this is a building boost of about 26 per cent compared to the average pace set in 2015 to 2019. The last time construction activity was buzzing this much was in the mid 1970s — a decade that began with the country being heavily plagued by stagflation. Toronto, the country’s most populous city, did not contribute to the supply construction surge, seeing its housing starts rise by only 1.4 per cent (or 500 units) compared to the 2015 to 2019 average. The report points the finger at Ontario’s Fair Housing Plan in 2017 which preceded a steep drop in pre-construction condo sales between 2018 and 2019. The boost in issued building permits may have the market turning the corner on this slump, but without a meaningful growth in unit development, there will be fewer housing options for renters and buyers. The Konfidis approach is grounded first and foremost in supply and demand fundamentals. Investors' bullish outlook on the Canadian housing market typically points to a strong demand picture bolstered by immigration and demographic trends of household formation growth, coupled with a lack of new supply to meet this demand. The Greater Toronto Area (GTA) is a great example of this backdrop, as described in this article. Full press release available here.

For iBuyers, the Price Is Right | The Wall Street Journal Some frustrated [U.S.] home buyers blame automated home flippers for the tough market, but those iBuyers also play a helpful role. While they may not help lower prices, iBuying can be beneficial to housing-market turnover. It spares time and energy required to host open houses. IBuyers handle small renovations and provide sellers with choice and a guarantee on a closing date. They may also bring inventory into a market that right now needs more of it. Zillow Research reports 84% of homes sold to one of the four largest iBuyers last quarter weren’t listed for sale beforehand. Unlike private-equity landlords, iBuyers are also sellers. Much like food-delivery platforms can drive up the cost of a restaurant’s food, higher home prices may be merely a consequence of the addition of large, for-profit companies as middlemen to the equation. One day you might benefit from such a service; another day you might pay some of the tab for your neighbor’s convenience. While the U.S. housing and mortgage markets are fundamentally different that their Canadian counter-parts, we closely monitor global trends for potential local implications. This article astutely highlights certain benefits to technology and investor evolution in real estate investment and provides a balanced view on what many believe to be a sensitive social topic. Full press release available here.

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Konfidis is pleased to share our weekly real estate investing industry news piece herein. We love connecting with our members. Reach out with your questions to hello@konfidis.com.

Shael Soberano, CFA Konfidis Inc. Chief Investment Officer

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