Canadian real estate sales are still dropping. Canadian Real Estate Association (CREA) numbers show home sales falling in November. Last month, only three major real estate markets saw increase on a year over year basis. The rest saw declines, especially in major markets like Vancouver – which led the way lower.
Canadian Real Estate Sales Drop Over 12%
Canadian real estate sales are still falling, and fast. CREA reported 33,318 sales in November, down 15.25% from the month before. Sales across the country are now down 12.54%, when compared to the same month last year. The decline is the eleventh consecutive month for declines, and is likely to continue.
Canadian Real Estate Sales
The unadjusted sales for all home types, as reported through the Canadian MLS.
Source: CREA, Better Dwelling.
The growth of Canadian real estate sales have been trending lower for years. Last month was the slowest November since 2013, and the largest annual decline since 2008. Sales have continued to trend lower from peak growth seen in February 2016. Maybe Santa will give everyone a condo for Christmas.
Canadian Real Estate Sales Change
The annual percent chage of unadjusted sales for all home types, as reported through the Canadian MLS.
Source: CREA, Better Dwelling.
Quebec, London, and Montreal Real Estate See Biggest Gains
The markets with the largest gains for November were Quebec City, London, and Montreal. Quebec City reported 611 sales in November, up 18.2% – the largest jump in the country. London followed with 737 sales, up 6.3% from last year. Montreal came in third with 3,630 sales, up 6.1% from last year. By the way, these weren’t just the three with the biggest gains. They are the only major markets with a gain to report.
Canadian Real Estate Sales By Market
Canadian real estate sales in markets with more than 500 sales in 2017.
Source: CREA, Better Dwelling.
Vancouver, Fraser Valley, and Victoria Real Estate See Biggest Losses
The biggest losses were all found in British Columbia last month. Vancouver saw 1,633 sales in November, a decline of 42.3% from last year – the largest in the country. Fraser Valley reported 977 sales, down 40.5% from last year. Victoria came in third with 476 sales, a decline of 24.3%. Toronto was somewhere in the middle of the list with 6,251 sales in November, a decline of 15.2% from last year.
Canadian Real Estate Sales Change By Market
The percent change in Canadian real estate sales, in markets with more than 500 sales in 2017.
Source: CREA, Better Dwelling.
All but three major Canadian real estate markets saw declining annual growth. This trend isn’t just a one month issue either, but we’ve seen consistently for most of 2018. Out of the two markets that did grow, two of them saw relatively small numbers. Is there a near term catalyst to reverse this trend?
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The only near term catalyst are further rate hikes and a looming recession and global growth slowdown… which of course will accelerate the current trend, not reverse it.
Real estate agents were saying that the economy isn’t good enough to hike anymore, therefore the current rates will keep and growth will resume. It must be nice to live in their mind, where they know the economy is weaker than it’s showing, but think people without job security and wage growth are going to keep going into debt to pay for their 72 month leased luxury cars.
This is how it’s been for a decade or so, in housing and stock markets. (IMO, of course.)
Economy rockin’? Great! Everyone’s got dough! The price of assets has to go up!
Economy sketchy? Great! Fed can’t raise rates, so the price of assets has to go up!
Smaller homebuilders in Vancouver now in distress. Lots of them trying to sell their building lots instead of building them out, offering the building plans free with purchase. A few even stopped out mid-construction, which tells me banks are turning the screws. Not willing to join builders in their stupidity and take losses as a result.
it’s tougher for them to launder their money through the Vancouver casino’s so they can wash it through real estate, no wonder these small time homebuilders are running out of steam!
The second chart is actually pretty interesting. Peak growth rate trended slightly higher for almost 5 years, then entered a crazy downtrend. Should wipe out years of sales volume in just a few months. Really bad considering a drop in volume normally precedes a drop in price. This is would be the first full negative year of growth from the looks of it.
https://i.imgur.com/ML1fQuK.png
I disagree. I’m a small builder (birdhouses) and things have never been better. In fact I’m moving into high rises to attract chimney swifts.
Can you build a house for my gerbil? He’s been approved for financing.
RE in 2019 around Canada will be defined by 1 fight:
Banking economists, Remax/Lepage pumper types, developers, construction companies, TREB, CREA, all newspapers etc..
VS
Reality (price bubble, massive debt, no savings, no wage growth)
And the winner……………..Reality.
Outside forces are not even necessary for this Canadian house of cards to crumble all by itself.
To be clear. Price bubbles, massive debt, no savings, no wage growth mean nothing when there are billions of offshore dollars pouring in to buy up Canadian real estate. The price bubble was driven by marginal demand at the top, and spread due to the massive influx of offshore cash – no local wages or savings required.
If the flow of offshore money were to truly stop, then price bubbles, debt, non-savings and zero-growth wages will act as accelerators. Now imagine if the offshore money actually started to flow out? Picture all those empty west side houses with ‘For Sale’ signs and no offshore buyers riding in on white horses: those houses would have to be bought with local wages. What would the price decline be?
True, I agree, offshore dollars pouring into certain cities has been hideous for locals. It has raised prices in these areas to ridiculous sale price to income ratios.
Yet we cannot put all the blame on offshore cash. We Canadians have also borrowed idiotic amounts out of FOMO, plain financial stupidity or to “keep up with the Zhang’s”…..I mean Joneses.
The Chinese government is restricting capital outflow, Canadian gov’t is finally waking up to money laundering, our debt levels are getting worse, no cash savings, low pay and lots of taxes.
Its still game over for RE. There is nothing to pop this up. The price declines will accelerate in all segments of the housing market.
I am not a sophisticated real estate investor. As the market went crazy I purchased a home in 2016 only because I was worried that my children would never be able to afford a place in Toronto in the future. I was not greedy but worried that I better get a real estate investment or be left behind. yes – this is typical fear of missing out. I did not want to be an amateur landlord but here I am. I have an investment property downtown (detached house) with 3 units in it rented out. The rent covers all expenses and I am up about $400 per month. I plan to keep it for the next 10-15 years and then give to my children. I have never invested in real estate before but now somehow show on paper that my property is up $400K. should I sell or should I hold? This Toronto market scares the hell out of me. Thanks BD for all your analysis and for the knowledgeable commenters.
If you are up 400k and making only $400 positive cashflow a month, I would say sell!
if you follow this blog closely you should know the answer.
Those $400k you made is a huge luck and you should never take it as granted.
Hundreds of thousands people in Toronto is sitting on the same gains as yourself but very tiny fraction of those will actually see those in their bank accounts.
It depends on the price you originally paid for the house Ibrahim but a $400k increase since 2016 sounds pretty high IMHO. In reality most areas of T.O. are selling at late 2016 pricing levels so little gain if any and once you factor in the LTT, commission on sale and in inflation, most are actually under.
But if the rents are covering all the expenses and that includes the mortgage and you’re cash flow positive, why would you want to sell in a city with 1% vacancy rate?! Again, it depends how much you paid for the house and with what down-payment but it sounds like you should be getting 6-8% return on your investment – much higher than GIC’s and the stock market isn’t exactly pointed in a positive direction.
I’m completely bear on the Toronto real estate market BTW and cashed out in early 2017 before the mini-crash but a cash flow positive investment in RE is typically a good investment if you have a 10-15 year horizon especially with so much market turbulence.
I’d say keep it because its meeting its long term goal of providing your kids a home in the future. Being cash flow positive is great. If you cashed out with 400K, because its not principal residence, there would be tax issues so you’re not 400K clear. With whatever “profit” you got after taxes would your kids have a home in the future?
I hope folks will be able to hang on tight to their homes to ensure a continued soft-landing. But it appears that might be wishful thinking. If buyers could be irrational when buying, it’s just a matter of time before they display the same irrationality when the center can no longer hold. Unfortunately, they bring the whole house down.
In my opinion, the unfortunate reality is that ‘rational’ selling will drive the decline not ‘irrational’…remember there are people sitting on hundreds of thousand of equity, maybe even over a million, that is NOT going to be eroded completely or even 50%. The could hit bottom and still walk away with well over siz figures.. Sure, they won’t sell early for fear of missing out of future gains, being old and not wanting to move however once the tide officially turns and sentiment is negative these owners, many of them with adult kids, will/may/should liquidate, shack up with the kiddies (tossing them a new car or vacation…), sit it out and then buy or most likely, rent. The irony is that we have too MANY houses, not too few….tick tock. BD4L.
I would argue that we don’t have too many houses…just over-priced houses.
Joe,
What we have is too many amateur landlords piling in since 2016. Once those weak hands are washed out it will put that housing stock back on the market again.