Latest news with #Sondhi
Yahoo
03-06-2025
- Business
- Yahoo
TD report calls into question Liberal housing plan's promise of 500,000 housing starts a year
The Liberal government was elected on an ambitious housing plan that promises to build about 500,000 new homes a year, but a report by Toronto-Dominion Bank released on Tuesday said the proposed policies will fall short of achieving that objective. 'Policies reviewed so far are likely to fall well short of closing the gap between the roughly 210,000 completions that Canada averages yearly, and the federal government's goal of getting to 500,000 units delivered over the next decade,' the report said. The Liberal housing plan, sold as Canada's most ambitious since the Second World War, promises several initiatives to kick-start housing construction, including cutting the GST for first-time homebuyers for new homes at or under $1 million, lowering development charges and reviving a 1970s program called the Multiple Unit Residential Building (MURB) program, which will provide more tax incentives for purpose-built rentals. 'All told, these measures could lift housing starts by some 15,000 to 20,000 units above our baseline,' the report said. 'However, the impact could be more apparent over the medium term.' Rishi Sondhi, economist at TD and author of the report, said the target for housing starts could fall to 400,000 units a year for housing affordability to be restored to pre-pandemic levels. 'When the pandemic hit you saw house prices soar across Canada and that really eroded affordability, so to get to conditions where they were before the pandemic struck, you need 400,000 units,' he said. 'Which is probably a more reasonable affordability backdrop, but it's not the most pristine Canada has ever seen, which was maybe more the early 2000s.' In the short-term, the report estimates housing starts will actually decline in 2026 to 215,000, from the 245,000 housing starts recorded in 2024. There are a number of factors playing out in the economy that are having an impact on the slowing in housing starts. They include slower population growth, oversupply in the Toronto condo market, rising construction costs and economic uncertainty. Another big challenge to hitting the target for housing starts is the labour supply in the construction industry, which is set to shrink over the next decade as a number of employees hit retirement age. Canada's residential construction sector employs 600,000 people, according to estimates by the Government of Canada. A report by BuildForce Canada published last year estimates the construction industry's workforce would have to grow to just under 1.04 million workers to close the housing gap. 'In fact, industry estimates project a 108,000 shortage in Canada's construction industry by 2034 after accounting for workforce needs and retirements,' the report said. 'At current productivity levels, getting to 400,000 completions per year in 10 years would require Canada's residential construction workforce to expand by 16 per cent each year.' Sondhi said this labour shortage issue will be compounded by ambitious infrastructure projects planned by federal and provincial governments, which means residential construction and infrastructure projects will be competing for the same workers. Sondhi said it is difficult to model out the number of housing starts that will result from the additional measures in the Liberal housing plan including reducing red tape, fast-tracking approvals and leveraging preapproved, standardized housing designs across the country. 'Even here, the stuff that isn't modelled out is probably not going to be enough to close the gap on its own,' said Sondhi. One policy initiative in the federal government's housing plan that could boost supply to hit its target, Sondhi said, is billions in financing promised for prefabricated homebuilders in Canada, which will be administered under a newly created federal housing entity called Build Canada Homes. Canada's national housing strategy remains 'under construction' Tariffs set to slow pace of homebuilding in Canada The report highlights other jurisdictions, such as Japan and Sweden, where prefabricated homebuilding was adopted to help boost housing supply in those countries. Research has estimated modular housing could speed up construction timelines by 50 per cent and cut costs by 20 per cent, according to the report. 'My stance is that it would have to play an important role if the government is going to hit its target, because the other things outside of this are not going to do the trick,' said Sondhi. • Email: jgowling@
Yahoo
27-03-2025
- Business
- Yahoo
Canada home prices likely to drop in 2025 as tariff uncertainty persists: TD
Canadian home prices should fall on average in 2025, with tariff uncertainty that muted the market in the first quarter unlikely to fade away, according to TD Economics' latest housing outlook. The tariff threat, as well as severe winter storms, led to a double-digit quarterly decline in sales and a mid-single-digit quarterly drop in prices — 'much weaker' than forecast in December, TD economist Rishi Sondhi wrote in a report published Wednesday. 'This much-softer starting point has led us to materially mark down our 2025 annual average growth forecasts for Canadian home sales and prices,' Sondhi wrote. TD now forecasts a 3.2 per cent drop in average home prices this year, as well as a decline in sales of 0.9 per cent. The tariff situation is seen as a key factor for the first quarter as well as the outlook ahead. Sondhi explicitly notes that the December forecast came prior to the January 20 inauguration of U.S. President Donald Trump. Trump's announcement of tariffs on that date was singled out as the 'moment' that sales began to plunge by the Canadian Real Estate Association, with February's month-over-month drop in sales the largest in nearly three years. The dismal conditions do not seem to apply to the cottage market to the same degree, with a new Royal LePage report forecasting an increase in prices for single-family recreational homes across the country. 'While the mainstream market is more sensitive to economic shifts, demand in the recreational segment remains steadfast, even during periods of market hesitation," Phil Soper, president and CEO of Royal LePage, said in a statement. Although 2025's first quarter for the broader market was particularly bad, Sondhi writes, 'elevated uncertainty and a deteriorating jobs market will yield subdued sales and price growth for much of 2025.' TD's revised forecasts have the biggest cuts to expectations in British Columbia and Ontario, with average home prices expected to fall 4.1 per cent and 6.4 per cent, respectively, in 2025. 'This reflects muted demand conditions in both markets and supply/demand balances that are heavily skewed in favour of buyers,' Sondhi wrote. The condominium market in the Greater Toronto Area is 'particularly soft,' he points out, and should keep average prices down for the entire province. Outside B.C., Ontario, and P.E.I. (where a one per cent drop in prices is forecast), TD still expects average prices to climb in 2025, though all provinces have had their price growth forecasts 'marked down,' Sondhi says. A tighter supply-and-demand relationship and 'comparatively better affordability' in Manitoba, Saskatchewan and Alberta mean quarterly price gains there should still 'outperform,' Sondhi adds. TD expects 'a notable rebound' in both sales and prices in 2026, based on its most recent quarterly forecast, which assumes six months of heavy tariffs before negotiations lead to an improved trade situation. In that scenario, uncertainty would eventually wane and interest rates 'should be at multi-year lows,' Sondhi says. Average prices are expected to rise 4.8 per cent in 2026, with sales up 10.1 per cent, TD projects. 'These factors will facilitate the release of significant pent-up demand. However, the scale of bounce-back in Canadian average home prices will likely be restrained by poor affordability in key markets like B.C. and Ontario." John MacFarlane is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jmacf. Download the Yahoo Finance app, available for Apple and Android.
Yahoo
10-03-2025
- Business
- Yahoo
Vancouver's housing market on 'firmer footing' than Toronto's, says TD Economics
With Canada's two priciest housing markets off to a sluggish start this year, TD Economics says the Vancouver market is "on a firmer footing" than Toronto's, and is expected to outperform this year when it comes to sales and price trends. Both markets saw sales fall in February, even as the Bank of Canada engages in a loosening cycle and slashes its benchmark interest rate, most recently issuing its sixth consecutive cut. Sales in the Greater Vancouver Area (GVA) in February fell 11.7 per cent compared to last year, and were down 28.9 per cent compared to the 10-year seasonal average for the month. The composite benchmark price slipped 1.1 per cent on an annual basis to $1,169,100. In the Greater Toronto Area (GTA), home sales fell 27.4 per cent last month on an annual basis, and were down 28.5 per cent from January. The average selling price also dropped 2.2 per cent compared to last year, to $1,084,547. Listings continued to rise in both markets. "Both the GTA and GVA housing markets have registered tepid performances to begin 2025, weighed down by economic uncertainty," TD economist Rishi Sondhi wrote in a research note on Thursday. "While both markets could continue struggling, the GVA is on a firmer footing than the GTA heading into this bout of tariff-related turbulence. This suggests that the GVA's housing market could again enjoy a leg up on the GTA this year." Sondhi writes that the overall soft start to the year will make it challenging for both markets to record positive sales and price growth in 2025, and economic uncertainty will weigh on both buyers and sellers, and therefore prices. "This is offsetting the support coming from lower interest rates, pent-up housing demand in both markets, a rising share of Canadians in their prime home-buying years, and looser mortgage rules." Still, Sondhi says Vancouver's housing market is in a better position to withstand the turbulence, noting the GVA's price resiliency. He notes that average home and benchmark prices in the GVA were down six per cent and four per cent, respectively, compared to pandemic peaks, while Toronto's prices were down about 15 per cent. He also says affordability conditions "didn't deteriorate by as much during the pandemic in Vancouver and its condo market doesn't face the same supply challenges." In the GTA, the condo market has weighed on softness, due to a supply glut and weak demand. "Sales levels for other structure types in the GTA have seen slightly stronger growth over the past two years, but price trends remain similarly tepid for these units," Sondhi noted. "The GVA's advantage is punctuated by its affordability backdrop, which has not deteriorated by as much as the GTA relative to historical norms. This is even with prices having dropped by much more in Toronto in recent years," the economist wrote. "Looking longer term, the fact that housing construction has been able to hold up much better in the GVA gives the region a leg up in the effort to address its housing shortage." With files from The Canadian Press Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on X @alicjawithaj. Download the Yahoo Finance app, available for Apple and Android.
