Real eState

Has the Canadian housing bubble burst? That could depend on time and place

Published

2 years ago

November 12, 2022

The recent decline in housing prices across Canada varies widely by location. Looking back over a longer period, the real estate market looks like a pretty good bet.

Some economists are proclaiming that the Canadian housing bubble has burst. Housing markets have indeed slowed considerably since their peak in February and March, but, unfortunately, economic bubbles are notoriously hard to identify and are often observed only after they burst.

One should probably set some bubble-defining parameters to get a better grip on the markets. For example, is the bubble defined by a collapse in housing prices, sales or both? Should the market change be measured from peak to trough, or considered month over month or year over year? What level of declining prices and sales constitute a burst bubble, rather than just normal market fluctuations in response to changes in demand or regulatory frameworks?

A review of housing market indicators quickly reveals that any conclusions about the state of housing markets depend upon the benchmarks used to study them. The peak-to-trough comparisons suggest much higher price declines than what year-over-year comparisons reveal. The reference points are not as material in comparing the decline in sales, which are considerably down year over year and from peak to trough.

A recent report by RBC Economics concluded that the expected slowdown in housing sales and prices has been the result of soaring interest rates. RBC expects interest rates to rise further and forecasts the “national benchmark price to drop 14 per cent from (quarterly) peak to trough.”

Again, benchmark prices can differ from average prices, which do not account for the differences in housing quality and size over time. The sales activity during recessionary times can switch from larger, higher-quality homes to smaller, lower-quality homes; hence, any change in average prices will not represent the change in the price of an average home.

At the same time, some housing markets will experience a more significant decline in sales and prices than others. For example, the RBC report shows housing activity in Calgary has shown more resilience than in Toronto.

Consider that the MLS Home Price Index (HPI), which controls for differences in housing size and quality, declined in Toronto by 1.3 per cent in October from the same time last year, while Calgary was up by 9.1 per cent.

The peak-to-trough declines were also more pronounced in Toronto than in Calgary. The HPI in Calgary declined by 4.2 per cent in October after peaking in May. In Toronto, the index was down 18 per cent from its peak in March. The RBC report noted that declining prices in Toronto have already returned half the gains realized during the pandemic.

The decline in housing transactions is steeper than prices. October sales were down by 49 per cent in Toronto from the same time a year ago. Other large housing markets showed lower annual declines, with Vancouver declining by 45.5 per cent and Montreal by 35 per cent. Annual housing sales in Calgary dropped even less, at 14.9 per cent.

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Real eState

Greater Toronto home sales jump in October after Bank of Canada rate cuts: board

Published

7 days ago

November 6, 2024

Anne Joseph

TORONTO – The Toronto Regional Real Estate Board says home sales in October surged as buyers continued moving off the sidelines amid lower interest rates.

The board said 6,658 homes changed hands last month in the Greater Toronto Area, up 44.4 per cent compared with 4,611 in the same month last year. Sales were up 14 per cent from September on a seasonally adjusted basis.

The average selling price was up 1.1 per cent compared with a year earlier at $1,135,215. The composite benchmark price, meant to represent the typical home, was down 3.3 per cent year-over-year.

“While we are still early in the Bank of Canada’s rate cutting cycle, it definitely does appear that an increasing number of buyers moved off the sidelines and back into the marketplace in October,” said TRREB president Jennifer Pearce in a news release.

“The positive affordability picture brought about by lower borrowing costs and relatively flat home prices prompted this improvement in market activity.”

The Bank of Canada has slashed its key interest rate four times since June, including a half-percentage point cut on Oct. 23. The rate now stands at 3.75 per cent, down from the high of five per cent that deterred many would-be buyers from the housing market.

New listings last month totalled 15,328, up 4.3 per cent from a year earlier.

In the City of Toronto, there were 2,509 sales last month, a 37.6 per cent jump from October 2023. Throughout the rest of the GTA, home sales rose 48.9 per cent to 4,149.

The sales uptick is encouraging, said Cameron Forbes, general manager and broker for Re/Max Realtron Realty Inc., who added the figures for October were stronger than he anticipated.

“I thought they’d be up for sure, but not necessarily that much,” said Forbes.

“Obviously, the 50 basis points was certainly a great move in the right direction. I just thought it would take more to get things going.”

He said it shows confidence in the market is returning faster than expected, especially among existing homeowners looking for a new property.

“The average consumer who’s employed and may have been able to get some increases in their wages over the last little bit to make up some ground with inflation, I think they’re confident, so they’re looking in the market.

“The conditions are nice because you’ve got a little more time, you’ve got more choice, you’ve got fewer other buyers to compete against.”

All property types saw more sales in October compared with a year ago throughout the GTA.

Townhouses led the surge with 56.8 per cent more sales, followed by detached homes at 46.6 per cent and semi-detached homes at 44 per cent. There were 33.4 per cent more condos that changed hands year-over-year.

“Market conditions did tighten in October, but there is still a lot of inventory and therefore choice for homebuyers,” said TRREB chief market analyst Jason Mercer.

“This choice will keep home price growth moderate over the next few months. However, as inventory is absorbed and home construction continues to lag population growth, selling price growth will accelerate, likely as we move through the spring of 2025.”

This report by The Canadian Press was first published Nov. 6, 2024.

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Homelessness: Tiny home village to open next week in Halifax suburb

Published

3 weeks ago

October 24, 2024

Anne Joseph

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.

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Here are some facts about British Columbia’s housing market

Published

4 weeks ago

October 17, 2024

Anne Joseph

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.

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