Canada

Canadian Real Estate Price Growth Is Climbing Again

Canadian real estate prices are just off of all-time highs. Canadian Real Estate Association (CREA) numbers show prices fell on a monthly basis in August, but were still positive from last year. The most interesting takeaway is the price growth deceleration across Canada, as interest rates rise. The rate of growth rapidly dropped, and bounced higher over the past few months.

Why You Care About National Trends

Usually an agent that can’t tell their asshole from a Vancouver tear down will say that real estate is local. That’s true… to an extent, but you can’t tell what’s local, if you don’t know what is a national influence. If prices in your neighborhood rise 10% in one year, it might be there’s not enough supply. If prices rise 10% across the country, it might be because there’s a bigger issue with the credit supply. Interest rates, inflation, wholesale banking costs, and credit cycles are all contributors. Not taking a look at broader influences is what chumps do. Don’t be a chump.

The “Typical” Home In Canada Now Costs Over $625,000

The price of a typical home in Canada fell from all-time highs, but not very far. The aggregate composite benchmark reached $625,400 in August, up 2.54% from the same month last year. The aggregate benchmark is an index of home prices across Canada’s largest cities. It’s the standard CREA economists built, so we’re going to be using industry numbers here.

Canadian Real Esate Benchmark Price

The price of a typical home across Canada’s largest cities, in Canadian dollars.

Source: CREA, Better Dwelling.

The price increase is substantial, but marks a trend of lower growth. In August 2017, we saw prices rise 10.55% on an annual basis. The year before that, we saw prices up 14.15% on an annual basis. The 2.54% in August 2018 is a large increase, but looks a little slow in contrast. The good news is it’s just off multi-year lows for growth reached in May and June. Although, coming off of large growth in previous years, there’s a good chance this is just a dead cat bounce.

Canadian Real Esate Benchmark Price Change

The annual percent change for the price of a typical home across Canada.

Source: CREA, Better Dwelling.

Note: You’re probably wondering what’s the deal with prices falling off of a cliff in April 2017? That’s when the wholesale bank funding costs made one of the biggest jumps since 2014. It tends to kill credit, and forces banks to be tighter with lending. People hate it when you know how credit works though. So just pretend you’re a bank executive diverting, and exclusively blame foreign buyers if anyone asks.

Canada’s Most Expensive Markets

Canada’s most expensive markets were Vancouver, Oakville, and Fraser Valley. The price of a typical home in Vancouver reached $1,083,400 in August, up 4.12% from the same month last year. In Oakville, an affluent suburb of Toronto, it reached $949,800, up 1.24% from last year. In Fraser Valley, a market so close to Vancouver agents overlap, it reached $871,600, up 10.71 from last year. Toronto is actually fourth, but didn’t top or bottom the list in anyway.

Canadian Real Esate Benchmark Price By Market

The price of a typical home across Canada’s largest cities, in Canadian dollars by market.

Source: CREA, Better Dwelling.

Canadian Real Estate Markets With The Biggest Gains Are In BC

The largest price increases were observed in Fraser Valley, Victoria, and Hamilton. As mentioned previously, Fraser Valley saw the price of a typical home reach $871,600, up 10.71% from last year. Victoria hit $692,700, up 8.47% from last year. The price of a typical home in Hamilton hit $578,000, up 7.22% from the previous years. These markets surround either Toronto or Vancouver. Big city expectations, for the suburbs.

Canadian Real Estate Benchmark Price Change By Market

The annual percent change for the price of a typical home across Canada by market.

Source: CREA, Better Dwelling.

The markets with the biggest drops are Regina, Barrie, and Saskatoon. The price of a typical home in Regina fell to $277,600 in August, down 4.77% from the same month last year. Barrie saw prices fall to $469,900, down 2.73% from last year. Saskatoon reached $293,900, down 2.29%. Still unclear if any of our readers can located these cities on a map.

Despite being off of all-time highs, real estate prices across the country are still very high. Not just in Toronto or Vancouver, but suburban regions like Fraser Valley and Oakville. Despite bank economists discussing the end of the national correction, we actually haven’t seen one. In order for their to be a national correction, prices kind of like… need to fall.

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12 Comments

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  • Trader Jim 6 months ago

    Exit rallies are my favorite. All suckers aboard, right before the record amount of new construction hits the market. I’m assuming all of those 60 years olds that were lining up for bachelors and 400 sqft one bedrooms are planning on extreme downsizing, right?

  • Thomas 6 months ago

    10 years ago, you could get a condo for $50,000 in Windsor. Now you can’t find a place for less than $200,000, and even then it looks like a barrack in Afghanistan. Canadians have lost their minds.

  • Ahmed 6 months ago

    Foreign buyers are a problem, but definitely not the only problem. The Bank of Canada has been warning long before people started seeing the empty homes pile up that there was a problem with Canadians not using the money to start businesses, instead using them to speculate on real estate.

  • Kevin 6 months ago

    Liquidity! Liquidity! LIQUIDITY!!!

    You can’t sell homes to people that can’t get a mortgage to buy it. You might think you’re just going to be in your condo for a few years, and you’ll turn a profit at these levels, but you have no-one to sell it to if prices rise faster than people can borrow.

  • Yuzheng 6 months ago

    The real drop usually happens as rates rise, and the cost of servicing grows faster than people anticipate. It slowly chokes off the economy as people no longer have the ability to spend, which kills employment. Death spiral. The recession will be blamed for house prices tank, but we all know the next recession is because of the cost of housing.

  • Joe 6 months ago

    Kinda excited to see average price of houses in Toronto for September. I think it will be positive YoY. Not sure about the rest of the GTA but we’ll see.

  • Lahdeedah 6 months ago

    “Still unclear if any of our readers can located these cities on a map.” – It’s spelled “locate”.

    “In order for their to be a national correction,” – It’s spelled “there”.

    Tsk tsk tsk.

  • SUMSKILLZ 6 months ago

    I have to say I look forward to the new picture posted each day, to headline a new news piece. Not always happy with what I’m reading but the picture usually triggers thought and that’s a good thing.

  • rx81 6 months ago

    Toronto Star is also reporting that GTA home sales will continue a double digit increase into the fall…

    https://www.thestar.com/business/real_estate/2018/09/26/gta-home-sales-shake-off-very-dark-period.html

    How this is sustainable, is beyond my understanding. No shortage of people that believe in year over year double digit growth that lasts forever.

  • Fiendish Thingy 6 months ago

    Benchmark, Shmenchmark…why not report the much more transparent, accurate, and honest median sales prices?

    The Lower Mainland is going down, and no amount of RE industry propaganda can stop it, or even slow it enough for a so-called “soft landing”. I wouldn’t be surprised by this time next year if LM listings have nearly doubled (including newly completed, unsold strata units) as sellers stampede for the exits. By this time next year, stress test rates could be 7% or higher, eliminating thousands of potential buyers…at current prices…

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