Canada’s real estate market has suddenly and dramatically cooled. Sales have dropped 24 per cent since this time last year. The average price of a home in this country has fallen by $179,047 since the peak in February.
And yet, has much actually changed?
“I consider it like letting the air out of a balloon,” said Colin Cieszynski, chief market strategist at SIA Wealth Management. “You don’t want it necessarily to pop and burst, but in the near term prices needed to come down to something that was a little bit more sustainable.”
For anyone trying to get into the market, the prospect of a cool down was always presented as an opportunity. But even with a 20 per cent drop in prices, Canada’s average home price has fallen back to where it was in early 2021.
What has changed, however, is how house-poor the typical Canadian family is feeling lately. Statistics Canada says the drop in home prices has helped drive the largest decline of household wealth this country has ever seen.
Billions lost in household net worth
It may be easy to look at the decline in home prices and, if you’re not an owner trying to sell, say, “That doesn’t affect me.”
But the reality is: Much of Canadian household wealth is tied up in home prices, the sector itself remains one of the biggest contributors to Canadian GDP, and it just took a hit.
Statscan says the net worth of Canadian households — defined as the value of all assets minus all liabilities — fell by a staggering $990.1 billion in April, May and June.
“This decline was compounded by a $389.8-billion drop in the value of non-financial assets, as the streak of gains in real estate that began in late 2018 was halted by a housing market grappling with rapidly rising interest rates,” wrote the data agency in a release last week.
The rest of the drop in household wealth comes as stock markets tanked in the second quarter. (Statscan’s figures only covered the period ending in June. Stock markets have recovered somewhat since then, but the once red-hot housing market losses have accelerated through July and August.)
As home values fall, there’s a knock-on effect for the rest of the economy, “like spending on building materials, spending on furniture, all that kind of stuff,” said BMO’s senior economist Robert Kavcic.
“We have more depressed housing activity that’s going to drag on real economic growth and is going to drag on job growth.”
As home values skyrocketed over the past decades, Canadian homeowners felt richer. They borrowed more and spent more, using their ever-rising home values as a sort of ATM.
As values fall off and interest rates rise, homeowners are less likely to borrow and spend.
Those interest rates will also slow the economy in another way, says Kavcic.
“If your mortgage payment is gone up $500 a month, or $1000 a month, that is immediately biting into discretionary spending that you could otherwise be spending elsewhere in the economy,” he told CBC News.
Inflation is not over
Meanwhile, inflation is eating into our purchasing power and eroding wage growth.
Combined, consumers are looking for ways to scale back spending, and small decisions make big differences when scaled out over a population.
“If you’re not going out for lunch, well, that’s one fewer sale at the local lunch place and maybe at some point, a couple fewer jobs,” said Kavcic.
He expects there are difficult days ahead.
Next week, Canada’s latest inflation numbers are set to be released. They’re forecast to show a deceleration in the main, headline number that in June reached a 39-year high of 8.1 per cent.
But economists are concerned that core inflation, which strips out volatile components like gasoline and food, is still rising. Cieszynski says the most recent inflation numbers from the U.S. show how tough it is to rein in rising prices.
“[Last week’s U.S.] numbers showed that inflation is sticky, it’s remaining high and it may or may not have peaked,” he said.
“Even if it does start to come down, it may come down much slower than [Wall Street] had anticipated.”
If inflation does persist even as higher interest rates bite into the economy, he says, central banks including the Bank of Canada would have to increase rates more than expected and remain high for longer than anticipated.
That would mean more turmoil for both stock markets and real estate markets. Which in turn would mean an even larger erosion of household wealth than we’ve already seen.
HALIFAX – A village of tiny homes is set to open next month in a Halifax suburb, the latest project by the provincial government to address homelessness.
Located in Lower Sackville, N.S., the tiny home community will house up to 34 people when the first 26 units open Nov. 4.
Another 35 people are scheduled to move in when construction on another 29 units should be complete in December, under a partnership between the province, the Halifax Regional Municipality, United Way Halifax, The Shaw Group and Dexter Construction.
The province invested $9.4 million to build the village and will contribute $935,000 annually for operating costs.
Residents have been chosen from a list of people experiencing homelessness maintained by the Affordable Housing Association of Nova Scotia.
They will pay rent that is tied to their income for a unit that is fully furnished with a private bathroom, shower and a kitchen equipped with a cooktop, small fridge and microwave.
The Atlantic Community Shelters Society will also provide support to residents, ranging from counselling and mental health supports to employment and educational services.
This report by The Canadian Press was first published Oct. 24, 2024.
Housing affordability is a key issue in the provincial election campaign in British Columbia, particularly in major centres.
Here are some statistics about housing in B.C. from the Canada Mortgage and Housing Corporation’s 2024 Rental Market Report, issued in January, and the B.C. Real Estate Association’s August 2024 report.
Average residential home price in B.C.: $938,500
Average price in greater Vancouver (2024 year to date): $1,304,438
Average price in greater Victoria (2024 year to date): $979,103
Average price in the Okanagan (2024 year to date): $748,015
Average two-bedroom purpose-built rental in Vancouver: $2,181
Average two-bedroom purpose-built rental in Victoria: $1,839
Average two-bedroom purpose-built rental in Canada: $1,359
Rental vacancy rate in Vancouver: 0.9 per cent
How much more do new renters in Vancouver pay compared with renters who have occupied their home for at least a year: 27 per cent
This report by The Canadian Press was first published Oct. 17, 2024.
VANCOUVER – Voters along the south coast of British Columbia who have not cast their ballots yet will have to contend with heavy rain and high winds from an incoming atmospheric river weather system on election day.
Environment Canada says the weather system will bring prolonged heavy rain to Metro Vancouver, the Sunshine Coast, Fraser Valley, Howe Sound, Whistler and Vancouver Island starting Friday.
The agency says strong winds with gusts up to 80 kilometres an hour will also develop on Saturday — the day thousands are expected to go to the polls across B.C. — in parts of Vancouver Island and Metro Vancouver.
Wednesday was the last day for advance voting, which started on Oct. 10.
More than 180,000 voters cast their votes Wednesday — the most ever on an advance voting day in B.C., beating the record set just days earlier on Oct. 10 of more than 170,000 votes.
Environment Canada says voters in the area of the atmospheric river can expect around 70 millimetres of precipitation generally and up to 100 millimetres along the coastal mountains, while parts of Vancouver Island could see as much as 200 millimetres of rainfall for the weekend.
An atmospheric river system in November 2021 created severe flooding and landslides that at one point severed most rail links between Vancouver’s port and the rest of Canada while inundating communities in the Fraser Valley and B.C. Interior.
This report by The Canadian Press was first published Oct. 17, 2024.