Montreal is the next Manhattan. Or maybe Winnipeg. Sorry, it’s definitely St. Johns. Wait… what’s happening? Real estate prices are rising pretty much across the country. Canadian real estate prices are showing the highest level of price synchronization in years. This is when markets, regardless of location, begin to show similar levels of price growth.
Asset price synchronization typically indicates market participants have become irrational. That’s not just a problem because high prices impact affordability. It means all markets are more likely to be vulnerable to a single shock factor. It’s like putting all of your mortgages in one basket.
Efficient Markets and Synchronization Risk
We need to get nerdy for a second, so bare with us. The efficient market hypothesis is the belief asset prices reflect all available material. If someone mis-prices an asset (sells too low or too high), it’s just an outlier the rest of the market will fix. Therefore, the price is always correct. It’s never wrong, because there’s not enough irrational players to skew the market. As ridiculous as it sounds, it’s the most common belief. Despite foundational economists like Adam Smith and John Maynard Keynes saying irrational behavior has a significant impact on markets, and that’s why bubbles exist.
In behavioral finance, they believe we’re just chimps in pants. We’re prone to making mistakes, and people will mimic each other’s behavior. One of those mistakes is knowing something doesn’t make sense, but pursuing it anyway. In this case, people chase the same opportunities as their friends, without rationale… like buying a Nickelback album. This is called synchronization, and it results in the mis-pricing of assets.
The more synchronized markets are, the more likely people are disregarding rational behavior. Markets may have common factors, but they’re all unique. For example, a high demand housing market shouldn’t rise with a market that’s losing people. Synchronized behavior doesn’t consider those factors. Usually every market will have a similar reason for why prices are rising or falling together. You think home prices should rise in an area with a declining population, because debt is cheap? Cute.
How Do We Identify Synchronization?
Okay, so how do we identify these risks? A lot of ways, but today we’re going to look at price growth synchronization. We’re going to look at the relationship between national, city, and rural. There’s 46 markets used in today’s analysis, grouped by economic region. For institutional subscribers, individual cities are already on the portal. We’ll also share a further breakdown on Twitter next week, for our Twitter fam.
Note the index is experimental right now, but we’ll be fine tuning it for more regular updates.
How do you read the data? We used a standard scale that starts at -1 and goes up to +1. If the correlation coefficient is -1, it means there’s a perfect negative correlation. In this case, that would mean a regional market showed price growth that was perfectly inverse to the national growth trend. That is, if national home prices increased, the market dropped perfectly in sync, and vice versa.
If the correlation coefficient is 1, it means the market is highly synchronized with the national price movement. If national prices rise, so does the regional market. If national prices fall, so does the regional market. This would mean the market is likely to be emotionally driven.
There’s also degrees of correlation, depending on where the correlation coefficient is.
Correlation:
Very Highly: 0.9 to 1.0
Highly 0.7 to 0.9
Moderate: 0.5 to 0.7
Low: 0.3 o 0.5
None found: 0.0 to 0.3
Inverse Correlation:
None found 0.0 to -0.3
Low -0.3 to 0.5
Moderate -0.5 to 0.7
Highly -0.7 to 0.9
Very Highly -0.9 to 1.0
Canadian Real Estate Prices Show High Synchronization Risk
Canadian real estate markets were the most synchronized since the Great Recession. Price growth of markets printed a correlation coefficient of 0.97 in January. This is the most highly synchronized the markets have been since June 2010. The index only became highly synchronized in September 2020, and very highly in November 2020. If you’ve spoken to a Canadian, you’ve probably realized they all think they live in the next hot market. Even the markets with negative population growth, and fleeing young people.
Canadian Real Estate Synchronization Risk
The degree of synchronization between National price growth, and regional growth. Higher index scores mean more synchronization, and lower means less.
Source: Better Dwelling.
Ontario’s Suburbs Show High Synchronization Risk
Ontario’s real estate markets have seen this level of synchronization recently. It’s a little different this time though. The market’s print was 0.95 for January, indicating it was very highly synchronized to the national trend. The market became highly synchronized in Aug 2020, and very highly by November. This isn’t as distant of a phenomenon for Ontario, with these levels last seen in 2018.
Ontario Real Estate Synchronization Risk
The degree of synchronization between National price growth, and Ontario real estate price growth. Higher index scores mean more synchronization, and lower means less.
Source: Better Dwelling.
One big difference is Toronto is largely left out of this trend this time. The city only printed a 0.78 score for January, the lowest level since November 2019. As recently as May 2020, it showed a 0.99 score. Removing Toronto from the index highlights how much of an outlier the region is.
The spread between Ontario’s least and most correlated market is 119%. This means the market most synchronized to the national trend is more than double the least synchronized. If Greater Toronto and Oakville are removed, the spread drops to just 17%. Both regions had very large surges in price growth in 2017. However, currently condo apartments are lagging in growth. Toronto’s condos printed the first negative price growth in years recently.
BC Real Estate Is Frequently Synchronized To The National Trend
BC real estate is frequently correlated with national price trends, unlike most regions. The market printed 0.93 in January, showing it was very highly synchronized. When Lower Mainland is excluded, that number bumps higher to 0.95. Once again, this is likely to do with slower city sales, especially in the condo apartment segment.
BC Real Estate Synchronization Risk
The degree of synchronization between National price growth, and BC real estate price growth. Higher index scores mean more synchronization, and lower means less.
Source: Better Dwelling.
Greater Vancouver is a huge drag on the numbers, actually diverging from the trend. The region’s correlation coefficient was 0.82 in January, which is highly synchronized. It’s just not at the same level as the rest of the province. As recently as October 2020 it was 0.91, and was 0.99 in March 2020. Before the pandemic, it was basically driving the trend. The drop most likely has to do with slower condo apartment demand.
Quebec Real Estate Has The Highest Synchronization Risk Since The Great Recession
Quebec real estate is highly synchronized to the national price growth trend. The province’s score was 0.94 in January, indicating a very high level of synchronization. The level was last this high in June 2010. Prior to 2019, that was peak price growth for the region.
Quebec Real Estate Synchronization Risk
The degree of synchronization between National price growth, and Quebec real estate price growth. Higher index scores mean more synchronization, and lower means less.
Source: Better Dwelling.
Prairie Real Estate Shows Highest Synchronization Since Peak Oil
The Prairies showed the highest synchronization with national prices in almost a decade. The index printed 0.93 for January, a level not seen since December 2011. That would have been right around peak oil prices.
Prairie Real Estate Synchronization Risk
The degree of synchronization between National price growth, and Prairie real estate price growth. Higher index scores mean more synchronization, and lower means less.
Source: Better Dwelling.
Atlantic Canada Shows Highest Synchronization In At Least 16 Years
Even Atlantic Canada is showing synchronized price growth, which is rare. The region came in at 0.96 for January, indicating it was very highly synchronized. This is new territory, with no prior connection to national price growth since at least 2005.
Atlantic Canadian Real Estate Synchronization Risk
The degree of synchronization between National price growth, and Atlantic Canadian real estate price growth. Higher index scores mean more synchronization, and lower means less.
Source: Better Dwelling.
Synchronization of asset price growth across markets is never a good thing, and there’s a reason it’s a whole branch of risk. It’s typically indicative of overly loose policy, excessive leverage, and irrational behavior. More important, it means people are piling into a similar type of risk. This means the odds of a single vulnerability impacting all markets increases.
While that sounds all theoretical, it gets less so when you realize even banks have begun to warn. BMO recently said if mortgage rates stay the same and prices continue, affordability reaches classic bubble territory next year. If mortgage rates increase to pre-pandemic levels, it also becomes a classic bubble. At least you’re all in this together.
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MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
MONTREAL – The Quebec Professional Association of Real Estate Brokers says Montreal-area home sales rose 9.3 per cent in August compared with the same month last year, with levels slightly higher than the historical average for this time of year.
The association says home sales in the region totalled 2,991 for the month, up from 2,737 in August 2023.
The median price for all housing types was up year-over-year, led by a six per cent increase for the price of a plex at $763,000 last month.
The median price for a single-family home rose 5.2 per cent to $590,000 and the median price for a condominium rose 4.4 per cent to $407,100.
QPAREB market analysis director Charles Brant says the strength of the Montreal resale market contrasts with declines in many other Canadian cities struggling with higher levels of household debt, lower savings and diminishing purchasing power.
Active listings for August jumped 18 per cent compared with a year earlier to 17,200, while new listings rose 1.7 per cent to 4,840.
This report by The Canadian Press was first published Sept. 6, 2024.
In the quest to find cities where renters can enjoy the best of all worlds, a recent study analyzed 24 metrics across three key categories—Housing & Economy, Quality of Life, and Community. The study ranked the 100 largest cities in Canada to determine which ones offer the most to their renters.
Here are the top 10 cities that emerged as the best for renters in 2024:
St. John’s, NL
St. John’s, Newfoundland and Labrador, stand out as the top city for renters in Canada for 2024. Known for its vibrant cultural scene, stunning natural beauty, and welcoming community, St. John’s offers an exceptional quality of life. The city boasts affordable housing, a robust economy, and low unemployment rates, making it an attractive option for those seeking a balanced and enriching living experience. Its rich history, picturesque harbour, and dynamic arts scene further enhance its appeal, ensuring that renters can enjoy both comfort and excitement in this charming coastal city.
Sherbrooke, QC
Sherbrooke, Quebec, emerges as a leading city for renters in Canada for 2024, offering a blend of affordability and quality of life. Nestled in the heart of the Eastern Townships, Sherbrooke is known for its picturesque landscapes, vibrant cultural scene, and strong community spirit. The city provides affordable rental options, low living costs, and a thriving local economy, making it an ideal destination for those seeking both comfort and economic stability. With its rich history, numerous parks, and dynamic arts and education sectors, Sherbrooke presents an inviting environment for renters looking for a well-rounded lifestyle.
Québec City, QC
Québec City, the capital of Quebec, stands out as a premier destination for renters in Canada for 2024. Known for its rich history, stunning architecture, and vibrant cultural heritage, this city offers an exceptional quality of life. Renters benefit from affordable housing, excellent public services, and a robust economy. The city’s charming streets, historic sites, and diverse culinary scene provide a unique living experience. With top-notch education institutions, numerous parks, and a strong sense of community, Québec City is an ideal choice for those seeking a dynamic and fulfilling lifestyle.
Trois-Rivières, QC
Trois-Rivières, nestled between Montreal and Quebec City, emerges as a top choice for renters in Canada. This historic city, known for its picturesque riverside views and rich cultural scene, offers an appealing blend of affordability and quality of life. Renters in Trois-Rivières enjoy reasonable housing costs, a low unemployment rate, and a vibrant community atmosphere. The city’s well-preserved historic sites, bustling arts community, and excellent educational institutions make it an attractive destination for those seeking a balanced and enriching lifestyle.
Saguenay, QC
Saguenay, located in the stunning Saguenay–Lac-Saint-Jean region of Quebec, is a prime destination for renters seeking affordable living amidst breathtaking natural beauty. Known for its picturesque fjords and vibrant cultural scene, Saguenay offers residents a high quality of life with lower housing costs compared to major urban centers. The city boasts a strong sense of community, excellent recreational opportunities, and a growing economy. For those looking to combine affordability with a rich cultural and natural environment, Saguenay stands out as an ideal choice.
Granby, QC
Granby, nestled in the heart of Quebec’s Eastern Townships, offers renters a delightful blend of small-town charm and ample opportunities. Known for its beautiful parks, vibrant cultural scene, and family-friendly environment, Granby provides an exceptional quality of life. The city’s affordable housing market and strong sense of community make it an attractive option for those seeking a peaceful yet dynamic place to live. With its renowned zoo, bustling downtown, and numerous outdoor activities, Granby is a hidden gem that caters to a diverse range of lifestyles.
Fredericton, NB
Fredericton, the capital city of New Brunswick, offers renters a harmonious blend of historical charm and modern amenities. Known for its vibrant arts scene, beautiful riverfront, and welcoming community, Fredericton provides an excellent quality of life. The city boasts affordable housing options, scenic parks, and a strong educational presence with institutions like the University of New Brunswick. Its rich cultural heritage, coupled with a thriving local economy, makes Fredericton an attractive destination for those seeking a balanced and fulfilling lifestyle.
Saint John, NB
Saint John, New Brunswick’s largest city, is a coastal gem known for its stunning waterfront and rich heritage. Nestled on the Bay of Fundy, it offers renters an affordable cost of living with a unique blend of historic architecture and modern conveniences. The city’s vibrant uptown area is bustling with shops, restaurants, and cultural attractions, while its scenic parks and outdoor spaces provide ample opportunities for recreation. Saint John’s strong sense of community and economic growth make it an inviting place for those looking to enjoy both urban and natural beauty.
Saint-Hyacinthe, QC
Saint-Hyacinthe, located in the Montérégie region of Quebec, is a vibrant city known for its strong agricultural roots and innovative spirit. Often referred to as the “Agricultural Technopolis,” it is home to numerous research centers and educational institutions. Renters in Saint-Hyacinthe benefit from a high quality of life with access to excellent local amenities, including parks, cultural events, and a thriving local food scene. The city’s affordable housing and close-knit community atmosphere make it an attractive option for those seeking a balanced and enriching lifestyle.
Lévis, QC
Lévis, located on the southern shore of the St. Lawrence River across from Quebec City, offers a unique blend of historical charm and modern conveniences. Known for its picturesque views and well-preserved heritage sites, Lévis is a city where history meets contemporary living. Residents enjoy a high quality of life with excellent public services, green spaces, and cultural activities. The city’s affordable housing options and strong sense of community make it a desirable place for renters looking for both tranquility and easy access to urban amenities.
This category looked at factors such as average rent, housing costs, rental availability, and unemployment rates. Québec stood out with 10 cities ranking at the top, demonstrating strong economic stability and affordable housing options, which are critical for renters looking for cost-effective living conditions.
Québec again led the pack in this category, with five cities in the top 10. Ontario followed closely with three cities. British Columbia excelled in walkability, with four cities achieving the highest walk scores, while Caledon topped the list for its extensive green spaces. These factors contribute significantly to the overall quality of life, making these cities attractive for renters.
Victoria, BC, emerged as the leader in this category due to its rich array of restaurants, museums, and educational institutions, offering a vibrant community life. St. John’s, NL, and Vancouver, BC, also ranked highly. Québec City, QC, and Lévis, QC, scored the highest in life satisfaction, reflecting a strong sense of community and well-being. Additionally, Saskatoon, SK, and Oshawa, ON, were noted for having residents with lower stress levels.
For a comprehensive view of the rankings and detailed interactive visuals, you can visit the full study by Point2Homes.
While no city can provide a perfect living experience for every renter, the cities highlighted in this study come remarkably close by excelling in key areas such as housing affordability, quality of life, and community engagement. These findings offer valuable insights for renters seeking the best places to live in Canada in 2024.
