Canada’s hot housing markets are setting off alarm bells for one of North America’s best known economists.
David Rosenberg, the chief economist and strategist at Rosenberg Research, described real estate valuations in this country as a “huge bubble” of historic proportions.
“This might be one of the biggest bubbles of all time,” Rosenberg said in an interview Wednesday. “Of course, it’s been predicated on where mortgage rates are.”
The comments followed the Bank of Canada decision to maintain its benchmark overnight interest rate at 0.25 per cent. In an accompanying statement, the central bank described recent housing market activity as being “much stronger than expected.”
The country’s largest market fetched headlines last week when the Toronto Regional Real Estate Board said the average selling price in the Greater Toronto Area jumped 14.9 per cent year-over-year in February to a record $1,045,488. And, in Vancouver, home sales in February were 42.8 per cent above the 10-year average, according to the local real estate board.
Rosenberg noted that a key national home price has experienced double-digit gains with virtually no wage growth to help Canadians keep pace. He described the relationship between income and home prices in Canada today as resembling the disparity between incomes and tech stocks during the dot-com boom-and-bust cycle.
“I’m pretty wary certainly about the valuations in residential real estate. Would I be going out and buying a home today as an investment in Canada or in the [Greater Toronto Area]? Absolutely not. I would just as soon go in the stock market.”
Canadian home prices on fire and policymakers using ‘squirt gun’
By Julie Gordon
OTTAWA (Reuters) -Buyers are turning up the heat on Canada‘s searing hot housing market, their frenzy leading to record sales, prices and starts, but in a budget unveiled on Monday the federal government did little to tamp down the fire.
The Teranet-National Bank Composite House Price Index showed home price gains accelerated 1.5% in March from February, data released on Tuesday showed.
The index was up 10.8% on the year, with a record 81% of the broader 32 markets surveyed posting annual gains above 10%. That far exceeds the last peak in 2017.
On Monday, Finance Minister Chrystia Freeland, presenting Canada‘s first budget in over two years, fleshed out a previously announced tax on foreigners parking money in Canadian homes, along with limited investments in affordable housing.
“The idea here is that homes are for Canadians to live in. They are not assets for parking offshore money,” Freeland told reporters.
For those watching, it was nowhere near enough.
“It’s like a squirt gun next to a towering inferno,” said Doug Porter, chief economist at BMO Capital Markets.
“We need to break the psychology that real estate is this can’t lose investment that only goes up,” he added. “Before this turns into a full-on bubble.”
March was a record month for new housing starts and home resale prices surged 31.6% year-over-year.
New Zealand, facing a similarly red hot market, introduced a raft of cooling measures including new taxes on investors and stricter lending rules.
And most measures that would cool the frenzy are up to the provinces and federal government who remain cautious as a third wave of COVID-19 rages.
Real estate agents say more listing are now coming to market, but they still see a massive long-term shortage. They expected more than the 35,000 units pledged in the budget.
“It’s not going to do much to intervene in the activity level we’re seeing now across the country,” said Christopher Alexander of RE/MAX Ontario-Atlantic.
(Reporting by Julie Gordon in OttawaEditing by David Gregorio and Alistair Bell)
Canada housing starts up 21.6% in March to new record – CMHC
By Julie Gordon
OTTAWA (Reuters) – Canadian housing starts rose 21.6% in March compared with the previous month, easily beating expectations and hitting a new record, data from the Canadian Mortgage and Housing Corporation showed on Monday.
The seasonally adjusted annualized rate of housing starts rose to 335,200 units in March, well ahead of analyst expectations for 250,000 units, and a new high for all months on record.
Much of the gain was on multiple urban starts, which jumped 33.8% to 222,358 units. Single-detached urban starts rose 3.6% to 78,615 units.
“The big acceleration came as weather was unseasonably warm in many parts of the country,” Royce Mendes, senior economist at CIBC Economics, said in a note.
Mendes added that new home construction will likely be a major contributor to overall GDP growth again in 2021, even as building activity cools off from the “torrid pace” of recent months.
Canada‘s average home selling price soared an eye-watering 31.6% year-over-year in March, hitting a new high as sales also climbed to a new all-time record, the Canadian Real Estate Association (CREA) said earlier this month.
A supply imbalance has been blamed for skyrocketing home prices through the pandemic, though new listings surged in March, which, coupled with strong starts, suggests a more balanced market could be coming.
“Red-hot demand for real estate propelled a record month for housing starts in March. While the market will need a long stretch of supply growth to have a meaningful effect on prices, the March numbers are a solid start,” said Shelly Kaushik, an economist with BMO Capital Markets in a note.
Canada‘s ruling Liberals are set to unveil their first full budget in two years on Monday, with billions in pandemic supports as COVID-19 infections skyrocket, a national daycare plan and new taxes on luxury goods.
(Reporting by Julie Gordon in Ottawa; Editing by Toby Chopra and Jonathan Oatis)
Canadian home sales, prices surge to new record in March
OTTAWA (Reuters) – Canadian home sales rose 5.2% in March from February, setting a new all-time record amid strong demand in markets across the country, the Canadian Real Estate Association said on Thursday.
The industry group said actual sales, not seasonally adjusted, rose 76.2% from a year earlier, while the group’s Home Price Index was up 20.1% from last March and up 3.1% from February.
The actual national average selling price hit a new record at C$716,828 ($572,821) in March, up 31.6% from a year earlier and rising 5.7% from February.
($1 = 1.2514 Canadian dollars)
(Reporting by Julie Gordon in Ottawa)
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