Torontonian Online Running in the fast lane! Real estate and more…
BuzzBuzzHome reports that home sales were at their second highest ever in October. Data from the Canadian Real Estate Association (CREA) suggests that home prices “were up 8.3 per cent on a year-over-year basis ($454,976 national average price) — although if you exclude the Toronto and Vancouver-area housing markets the increase was only 2.5 per cent ($339,059). Overall, CREA described the country’s housing market in October as “balanced.”
Canada’s banks reacted to housing data with mixed responses. See the below excerpt from BuzzBuzzHome for what BMO, TD and RBC thought of the latest numbers:
BMO
Douglas Porter, chief economist at BMO Capital Markets, wrote that while the market “just keeps grinding ahead at the national level,” the underlying regional pictures reveals a clear splint into three distinct market types.
We’ll call them hot, cold and lukewarm.
“While the overall picture this year has been one of surprising strength for the national market, there are many — mostly oil-driven — cities that have softened markedly,” stated Porter in BMO’s analysis of the CREA figures, noting that year-over-year home sales were down 36 per cent in Calgary, 16 per cent in Edmonton, 21 per cent in Saskatoon and 12 per cent in Regina.
Then of course there’s the markets that didn’t show much movement at all. Prices in Montreal, Ottawa, Winnipeg and Halifax are all up by almost exactly two per cent so far this year, while sales in each of these cities are up between zero and six per cent.
“Almost half of all major markets are in this unremarkable middle tier, posting price gains of less than five per cent in 2015,” Porter said.
Then there are the Vancouver and Toronto markets, and some nearby regional markets, which, according to BMO, “remain simply too hot for comfort.”
“In the GVA and GTA continued strong demand for a limited supply of detached properties is sending prices through the roof, as international migrants, young Millennials and an apparent influx of foreign wealth flock to these two areas,” Porter said.
TD
In their analysis of the national housing figures from October, TD Economics warned: “Canada’s hot housing market days may be numbered.”
“October is the month we expected the impact of low interest rates to start to fade. And indeed, despite continued gains in Ontario and BC, many markets across Canada have geared down following the interest-rate induced pop in home sales earlier this year,” TD economist Diana Petramala stated in her report.
Indeed, the bank predicts that Canadian consumer borrowing rates are likely to follow a rise in US interest rates, which could happen as early as December.
“While interest rates are likely to go up very gradually, elevated home prices and debt levels have left Canadian households far more vulnerable to small changes in interest rates than they have been in the past. As such, we continue to anticipate a sharp moderation in housing activity next year as interest rates head higher,” Petramala wrote.
RBC
RBC Economics noted that while Vancouver and Toronto still displayed signs of ‘heat’ — and possibly overheating in some of their market segments — other local markets still range between “recovering slowly to struggling.”
“As we pointed in previous commentaries, a main implication is that Canada’s housing market faces opposing risks in the near term,” RBC wrote in its report. “On one side, Vancouver and Toronto risk becoming overly hot, while on the other side, markets in oil-producing provinces such as Calgary risk being stuck in correction mode.”
Going forward, RBC says it expects that “continued headwinds in markets sensitive to the oil sector and the activation of self-correcting mechanisms (deteriorating affordability, rising supply of newly built homes) in Canada’s high-priced markets later next year” will lead home sales in Canada to ease by 0.7 per cent in 2016 following a five per cent gain in 2015.
Where do you stand on the latest numbers from CREA? Do you think the market is balanced or that the “hot housing market days may be numbered?” Share your thoughts with me in the comments!
