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Teranet: Expect Loss of Real Estate Momentum in Toronto, Ottawa, and Montreal – Better Dwelling

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Canada’s largest land registry operator saw Canadian real estate prices moving higher. The TeranetNational Bank of Canada House Price Index (HPI) shows prices increased in March. Analysts from the creator of the index warned the pandemic is likely to have an abrupt shift soon. As the lockdown carries on, they expect the index to cool in almost every market – especially those in Eastern Canada.

The Index Is Expected To Cool Over The Next Few Months

It’s really important to know how the HPI differs frrom board data to understand this month’s numbers. The HPI is one of the most accurate sources of data, because it only counts completed sales. This differs from real estate boards, which count sales as soon as they are unconditional. Boards consequently have the freshest information, but it’s also subject to revisions. The HPI has more accurate information at reporting, but it’s subject to some lag, since it only includes completed sales.

During most periods, the difference between the two would be mostly minimal. However, during periods of volatility, both will have their issue. Boards may include sales that never actually close, revising numbers lower. The HPI will lag, not reflecting a rapid deterioration as was observed late last month. Neither are better or worse, but those are important details to keep in mind over the next few months.

With that in mind, Teranet-National Bank of Canada analysts left some important notes. Home prices were gaining momentum in March, but that is based on registry data. Since registry data lags, the index should reflect the cold water poured on sales. Analysts believe “the loss to be more prevalent in the metropolitan markets located in Central and Eastern Canada (Toronto, Hamilton, Ottawa-Gatineau, Montreal and Halifax) which so far have pulled the national HPI up.”

Canada’s Largest Real Estate Markets Made Big Gains In March

The C11, an index including Canada’s 11 largest real estate markets, made a big advance last month. The price index climbed 0.62% in March, and is now up 3.84% from the same month last year. The firm notes the monthly increase was double the average seen over the past 10 years.

Teranet-National Bank HPI C11 (Annual Change)

The 12 month percent change of real estate prices in Canada’s 11 largest cities, according to the TNB HPI.

Source: National Bank of Canada, Teranet, Better Dwelling.

Toronto Real Estate Prices Reached A New High

Greater Toronto real estate prices advanced a little faster than the C11 index. Prices were up 0.86% in March, an increase of 6.26% from last year. The new peak high for the city is being driven entirely by the rise in condo apartments. This 12-month increase is almost half the increase reported using the board’s methodology.

Toronto Real Estate Price Change

The 12 month percent change of real estate prices in Toronto, according to the TNB HPI.

Source: National Bank of Canada, Teranet, Better Dwelling.

Vancouver Prices Rise, But Still Lower Than Last Year

Greater Vancouver real estate prices advanced even more than Toronto. The price index increased 1.02% in March, but was still 0.69% lower than the same month last year. Prices remain 4.97% below the peak reached in July 2018.

Vancouver Real Estate Price Change

The 12 month percent change of real estate prices in Vancouver, according to the TNB HPI.

Source: National Bank of Canada, Teranet, Better Dwelling.

Montreal Real Estate Makes A Smaller Than Average Gain

Probably the most interesting move last month, Montreal lagged the C11 movement. The city’s index increased 0.16% in March, bringing it 7.54% higher than the same month last year. Prices are now at a new all-time high, and rising faster than the C11 has over the past year. The monthly movement is just a little strange, considering the market still hasn’t seen an increase like Toronto or Vancouver yet.

Montreal Real Estate Price Change

The 12 month percent change of real estate prices in Montreal, according to the TNB HPI.

Source: National Bank of Canada, Teranet, Better Dwelling.

Calgary Real Estate Falls By Every Measure

Greater Calgary real estate looked like it was about to recover, but took a nosedive. Prices fell 0.13%  in March, bringing them 1.31% lower than the same month last year. Prices are now 8.23% below the peak hit in October 2014 – more than half a decade ago.

Calgary Real Estate Price Change

The 12 month percent change of real estate prices in Calgary, according to the TNB HPI.

Source: National Bank of Canada, Teranet, Better Dwelling.

Like most other indicators, the abrupt change in direction is of limited use. After the biggest rise of unemployment since the Great Depression, we’re in unprecedented territory. Faster information isn’t necessarily better either, since turbulent times often lead to revisions. The best bet is watching for signs of stabilization, or signs of destabilization.

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Despite the challenges, Edmonton area real estate values 'have held up extraordinarily well' – Edmonton Journal

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I have to say the Edmonton area real estate market has surprised me.

When you consider the onslaught we have had in the past five years — oil price crash, more than 100,000 job losses, fires, floods, domestic and international trade disputes and then COVID-19, I would say the Edmonton and area real estate values have held up extraordinarily well.

Since 2014, we’ve only seen modest declines in prices, with single family homes declining the least. Edmonton remains Canada’s most affordable major city with one of the highest average incomes.

Other Canadian cities have seen significant price gains in the same time period creating a bigger difference in real estate values between regions. We have had clients who can work anywhere and chose Edmonton as they can afford much nicer living quarters here for the same money.

Given the lower prices and interest rates combined with rising rental demand, it is easier for investors to get positive cash flows. We are seeing investors looking at condos for their positive cash flow. This fact will help to support our real estate values.

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Toronto and Vancouver Real Estate Inventory May Get A Boost From AirBNB Slowdown – Better Dwelling

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Canadian real estate markets may be getting another inventory headwind soon. National Bank of Canada (NBC) research estimates AirBNB hosts may contribute to oversupply later this year. As the slowdown impacts hosts, many may be incentivized to sell. By their estimates, just a quarter of hosts selling would cause inventory in cities like Toronto and Vancouver to swell.

AirBNB and Housing Inventory

AirBNB helps homeowners take existing housing stock and convert it to short-term rentals. Rather than staying in hotels, travelers can now stay in existing non-hotel stock. At first, it wasn’t a big issue when just a few people were doing it. As the platform expanded, people began buying additional housing just to operate short-term rentals. By repurposing housing that would otherwise be long-term units, cities now need additional housing. Basically, short-term rentals lead to an inventory squeeze, pushing rents and prices higher. Temporarily at least, for as long as the squeeze persists. That squeeze could end as quickly as travel did.

The Travel Industry Expects A Big Slowdown

The travel industry doesn’t expect travel to recover quickly from the pandemic. The US has approved some routes cutting plane traffic up to 90% until September. The IATA, the trade association for international airlines, also doesn’t see traffic returning to 2019 levels until at least 2023 – at the earliest. What does this mean? Fewer users of short-term rentals, and more competition from hotels for those travelers. All of this can have a big impact on real estate inventory, according to NBC numbers.

Canada’s Biggest Real Estate Markets May See Inventory Spike

If just a quarter of AirBNB inventory is sold off, NBC sees a lot more real estate listings on the market. In Vancouver, the bank estimates real estate listings would rise 12%. Montreal would see an increase of 27% in resale listings. Toronto is another story though, with inventory forecasted to rise a whopping 34%. That’s with just 25% of AirBNB exiting as hosts.

AirBNB Boost To Canadian Real Estate Inventory

The potential increase in real estate listings if 25% of AirBNB properties were listed for sale.

Source: National Bank of Canada, Better Dwelling.

The boost is another headwind for inventory rising later in the year. Inventory was already expected to rise in the coming few months. NBC economists believe this would be “exacerbating oversupply in the coming months.”

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How Is The Real Estate Market In Muskoka Post COVID19 – Hunters Bay Radio

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In a brand new video podcast series, Gerry Lantaigne with Sutton Group – Muskoka Realty discuses the world of real estate in Muskoka during the Coronavirus pandemic.

Join Gerry every month as he updates you on The State of Real Estate

Watch the inaugural episode here:

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