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From our friends at BuzzBuzzHome.com

A great piece of real estate market analysis was published on the Reuters website this afternoon. It really got us thinking about the future of the condo market in Canadian cities.

To give you the gist of it, the writer asked if a condo market crash in Canada’s major cities could be avoided if immigrants and baby boomers continue to purchase condos. These two factors, combined with limited land availability, may provide long-term support to the condo market.

Due to high prices for fixed upper homes, especially in Vancouver and Toronto, immigrants are finding condo ownership to be the most appealing alternative. According to the article, the rapid build up has been spurred by immigration.

“The booming market is concentrated in the heavily populated and pricey cities of Vancouver and Toronto, destinations for many of the more than 200,000 people who move to Canada each year,” the article explained.

Along with first time homebuyers, baby boomers are also drawn to condominiums.

The third factor that may help the condo market avoid a steep decline is physical and regulatory land restraints in Vancouver and Toronto. These restraints have caused a shift away from single family homes to more dense high-rise communities. George Carras, president of RealNet Canada, explains in the Reuters article that building high density housing is a natural progression for cities that have limited space for outward expansion.

The Reuters piece also notes that lessons have been learned from the declines of the 1980s, when banks and developers did not pay enough attention to demand and were hit hard when interest rates rose.

These days, construction often does not begin until the development is well on its way to being sold out and financing is usually worked out with a bank before shovels are in the ground.

Alright, let’s recap to see if all this makes sense.

Prices for single detached homes are high, often rendering them unaffordable for first time homebuyers. Many first time buyers are recent immigrants to Canada who favour living in an urban area, and considering Canada’s high immigration rate, there is a constant demand for new, more affordable types of housing ie. condominiums. Baby boomers are also drawn to this type of housing because they still want to live in an urban area, but may not need as much space or would like to avoid the maintenance costs that are often associated with ownership of a traditional single family home.

And, as we just saw, fewer risks are being taken on the supply side when compared to previous condo-building booms and busts.

While this doesn’t completely negate the legitimacy of those who argue that the current rate of condo development is unsustainable, it certainly lends credibility to the idea that a severe decline is less likely because of these novel factors that differentiate this housing boom from those that have occurred in the past.

And that’s our market analysis for the day.

From the Globe and Mail:

A jump in the number of housing starts in Ontario last month helped boost the national seasonally adjusted rate to 197,400 units in June, Canada Mortgage and Housing Corp. reported Monday.

The rate was up from a revised 194,100 units in May and 194,100 units in April, also revised upward, the federal Crown corporation said in its monthly report.

“Housing starts increased in June due to an increase in single and multiple starts in Ontario,” said CMHC chief economist Bob Dugan.

Ontario’s rate of urban starts increased by 24.1 per cent in June to 69,000, based on 6,390 actual starts last month, up from 55,600 in May.

The only other region of the country to show a gain last month was Atlantic Canada, which gained 5.6 per cent to 9,500

The biggest regional decline was in British Columbia, which showed a 27.6-per-cent decline to a rate of 21,200 units, with only 1,859 actual starts.

Urban starts decreased 3.6 per cent in Quebec to 42,800, and by 1.2 per cent in the Prairie region to 32,100.

The agency pointed out that recent months have shown particular strength, which it doesn’t think will last.

“The revised numbers show that housing starts have been above their trend line since March. However, we expect housing starts to move back towards levels consistent with demographic fundamentals in the near term.”

Sonya Gulati, an economist at TD Economics, said in a note that Canadian housing starts in the first half of 2011 have been averaging at 191,000 per month — well above TD’s forecast of 178,000 units.

“Recent homebuilding activity suggests that builders are breaking ground sooner rather than later to beat out interest rate hikes on their way next year which will likely simmer down housing demand,” Ms. Gulati wrote.

“Over the 2012-13 period, we are calling for a moderate correction in both resale activity and home prices across the country. With the resale home market gravitating more towards balanced territory, homebuilding should follow suit, albeit potentially with a bit of a lag.”

Summer housing market trends toward balance after an active spring season

Home sellers outpaced buyers on Greater Vancouver’s Multiple Listings Service® (MLS®) in June, drawing the market back toward balance this summer.

The Real Estate Board of Greater Vancouver (REBGV) reports that residential property sales of detached, attached and apartment properties reached 3,262 in June, a 9.8 per cent increase compared to the 2,972 sales in June 2010 and a 3.4 per cent decline compared to the 3,377 sales in May 2011.

New listings for detached, attached and apartment properties in Greater Vancouver totalled 5,793 in June. This represents a 4.5 per cent increase compared to June 2010 when 5,544 properties were listed for sale on the MLS® and a 2.3 per cent decline compared to the 5,931 new listings reported in May 2011.

Last month’s new listing total was 9.8 per cent higher than the 10-year average for June, while residential sales were 7.3 per cent below the ten-year average for sales in June.

“With sales below the 10-year average and home listings above what’s typical for the month, activity in June brought closer alignment between supply and demand in our marketplace,” Rosario Setticasi, REBGV president said. “With a sales-to-active-listings ratio of nearly 22 per cent, it looks like we’re in the upper end of a balanced market.”

At 15,106, the total number of residential property listings on the MLS® increased 3.1 per cent in June compared to last month and declined 14 per cent from this time last year.

The MLSLink® Housing Price Index (HPI) benchmark price for all residential properties in Greater Vancouver over the last 12 months has increased 8.7 per cent to $630,921 in June 2011 from $580,237 in June 2010.

“The largest price increases continue to be in the detached home market on the westside of Vancouver and in West Vancouver,” Setticasi said. “Since the end of May, the benchmark price of a detached home rose more than $147,000 on the westside of Vancouver and over $80,000 in West Vancouver. Detached home prices in Richmond, however, levelled off slightly, declining $25,000 in June.”

Sales of detached properties on the MLS® in June 2011 reached 1,471, an increase of 29.1 per cent from the 1,139 detached sales recorded in June 2010, and an 11.8 per cent decrease from the 1,667 units sold in June 2009. The benchmark price for detached properties increased 13.4 per cent from June 2010 to $901,680.

Sales of apartment properties reached 1,266 in June 2011, a 0.6 per cent increase compared to the 1,258 sales in June 2010, and a decrease of 29.3 per cent compared to the 1,790 sales in June 2009. The benchmark price of an apartment property increased 3.5 per cent from June 2010 to $405,200.

Attached property sales in June 2011 totalled 525, an 8.7 per cent decrease compared to the 575 sales in June 2010, and a 34.5 per cent decrease from the 802 attached properties sold in June 2009. The benchmark price of an attached unit increased 6 per cent between June 2010 and 2011 to $522,424.