Canada

Canadian Real Estate Sales Jump To 2016 Levels, But Industry Cautions Market

Who needs government stimulus? Canadian real estate sales are on the rise, in almost every major market. Canadian Real Estate Association (CREA) numbers show real estate sales are back to pre-cooling measures, as of September. The big spike in sales may have you thinking of a recovery. However, CREA’s chief number cruncher expressed some concerns. The length of the rebound from lows will be dependent on the global economy.

Canadian Real Estate Sales Rise Over 15%

Canadian real estate sales made a substantial climb compared to last year. CREA reported 41,819 sales in September, down 3.81% from the month before. Compared to the same month last year, sales are up a whopping 15.52%. Monthly declines are seasonally expected, but the annual increase is big news.

Canadian Real Estate Sales

The unadjusted sales for all home types, as reported through the Canadian MLS.

Source: CREA, Better Dwelling.

Sales growth is trending higher, as government’s promise to stimulate demand. September’s rise in sales is the biggest 12-month increase since February 2016. Last month is also 7.45% higher than the 10-year median number of sales for September, and the biggest since 2016. Strange to promise demand stimulus, as real estate sales approach new highs. Sales are right back to levels before governments tried to lower sales volumes.

CREA’s chief economist Gregory Klump poured a little cold water on the sales increase. Klump notes, “how long the current rebound continues depends on economic growth, which is being subdued by trade and business investment uncertainties.” Basically, things have improved – but remain cautious.

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.

British Columbia Has The Fastest Rising Markets

The fastest rising sales numbers are in Vancouver, Fraser Valley, and Quebec City – in that order. Vancouver reported 2,363 sales in September, up 44.6% compared to the same month last year. Fraser Valley followed with 1,283 sales, up 31.3% over the same period. In a distant third is Quebec City with 553 sales, up 22.6% from last year. Worth a note is BC markets were unusually slow last year. Even though Vancouver and Fraser Valley saw a big jump in sales, they’re still shy of 2017’s levels.

Canadian Real Estate Sales By Market

Canadian real estate sales in markets with more than 400 sales in 2018.

Source: CREA, Better Dwelling.

Slowest Rising Sales Are In Greater Toronto Suburbs

The slowest markets in Ontario are Greater Toronto suburbs, and Halifax. The Niagara region reported 472 sales in September, down 4.3% compared to last year. Hamilton follows with 1,020 sales, up 3.2% from last year. Halifax was the third slowest major market with 514 sales, up 5.5% from last year. In case you missed it, only one major market in Canada saw declines in sales last month.

Canadian Real Estate Sales Change By Market

The percent change in Canadian real estate sales, in markets with more than 400 sales in 2018.

Source: CREA, Better Dwelling.

Canadian real estate sales are up around the country, in all but one major market. When markets move like this in sync, it typically has little to do with local fundamentals. Instead, this more likely has to do with the anticipation of broad policy changes.

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14 Comments

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  • Jeff 1 month ago

    Sales volume spike is just delayed demand. People paused to see if prices would fall, and when they didn’t, they ended up being squeezed in with the usual buyers.

    • Oakville Rob 1 month ago

      Hi Jeff – I would offer that prices have fallen, in many cases by 30% or more. What $1M buys today is much more than what $1M bought in 2017, but the stats we see state sales prices and volume without gauging the ‘value’ of those sales. Some sold for more previously, but we’re not hearing about the *back-flips* so-to-speak. A back flip results in a sore back, a face-plant, and a lost shirt. No one wants to talk about that, especially during an election.

      I think the news is misleading at best. Time will tell.

  • Will Sih 1 month ago

    Surprised CREA chimed in on the fleeting nature of a bump like this, but despite MSM saying it’s a recovery, you would need at least over a year of data showing sales growth.

    Demand is just being pulled forward, since buyers are worried the government is going to increase prices. Expecting a smaller than normal beginning to next year. You can only pull so much demand forward, or delay your purchase so long. Most buyers are users, so they don’t care if they buy too high to make a profit in the near term.

    • Mortgage Guy 1 month ago

      Surprised they didn’t connect Stephen’s feedback on the sales increase. The US received a sales bump right before the Great Recession it looks like. Prices fell afterwards, right through to a 2012 bottom.

      https://twitter.com/StephenPunwasi/status/1184152353475350528?s=20

      No mention of it, but I believe the bump in sales links back to the article he wrote about the US giving a downpayment assistance program as demand stimulus. History doesn’t repeat, but it sure as heck rhymes.

  • Ahmed 1 month ago

    I can tell you with a fair amount of certainty, Toronto thinks condo prices will keep rising forever. My co-workers all think they have to get in before the election, or the government is going to print new equity. Even though it never really works that way.

  • Saab Kaur 1 month ago

    Have any of you considered what happens if prices never come down?

    • Oakville Rob 1 month ago

      Thanks Saab, that is an amazingly salient thought. The median income is still about $60K in Toronto. That doesn’t feed a big mortgage, and doesn’t provide for $500,000 down payments. On a graph of income, mortgage payments, and house prices the spread is ludicrous today, let alone 10 years from now. It seems like we are in a phase of stagflation that could have bad results for average/all Canadians.

      • John Jay 1 month ago

        Rob, I have been trying to use my rational head for the past 5-7 years and have been crushed on the sidelines. I agree that I don’t see our prices shooting much higher for a long time unless the feds ditch B20 and loosen credit again. Then marketing, media and hormones will send prices higher again. However, it will likely push us into a proper collapse.

        I’m at a loss for words at this market. I went to an international risk assurance conference and there was a key note speaker who was talking about Canada. He said that we have an issue that can’t be solved by the government without huge political backlash. We have two markets that are out of control and money flows into them as a safety deposit box for shady money around the world. I don’t care what they say about foreign investment only being 4%. We just can’t track their funds. We are the new money laundering capital of the world alongside Australia.

        If we hit a recession, sure Canadians might pull back from housing but our housing will look dirt cheap to foreigners. Even at our prices, the valuations are cheap in USD terms. Imagine if our dollar drops 20-30%, our homes will look super cheap even with a 15% tax.

        I think we should ban foreign ownership but that will never happen. A tax on capital gains on primary residences would be a great way to cool the market but citizens would LOSE THEIR MINDS if that happened.

        I don’t know what to make of this madness.

        • Joseph 1 month ago

          John, just a quick word on one of you points.

          There’s nothing people with shady money despise more than losing their shady money. If your comment:

          “Imagine if our dollar drops 20-30%, our homes will look super cheap even with a 15% tax.”

          were to happen, the shady money would leave a lot earlier than when the dollar drops to 20-30%. They’d be pulling out within a 5% drop.

          That’s the point at which things would start destructing. Mass exodus of foreign money, followed by regular Canadians jumping on the fear bandwagon. It’s what happened in 1989 by the sounds of it. It doesn’t take much to turn the tide.

          Personally, I believe a drop in the CAD is what will initiate the turn. How much lower can the Canadian interest rate drop? Eventually, lowering the interest rate won’t stimulate a thing. The CAD devaluation may follow-suit at that point.

          I’m no economist, just the way I see it turning out.

          PS. Don’t expect house prices to drop massively. They will drop, but more-so, stay stagnant for a long time waiting for incomes to catch up. This is the point where realtors have to start looking for jobs other than real estate. Obviously, good house deals will be found, but I get the feeling you’re expectation of house prices dropping is too aggressive. Keep saving in the meantime and either way, you’ll be able to take advantage of the situation when things turn.

          PPS. Wouldn’t it be great if a real estate website automated house purchases by the time the next real estate run happened and was widely accepted? This would be much better than the current situation where realtors drive up the market prices. We’d save A TON on commissions. This ESPECIALLY needs to be explored as house prices are massive now. Realtors are eating up way too much for the effort put in.

          • John Jay 1 month ago

            Foreign buyers are parking shady money in Canada to avoid being taken by their governments. So a loss of 10-20% in Canada is just the cost of laundering/hiding the funds. I doubt they’ll pull out the funds since there’s no real alternative. Going to stocks at these prices? I doubt it.

            I don’t expect home prices to drop in a major way. I expect them to stagnate for a long time as you said. They’re so far detached from incomes that I don’t think there’s that much room to the upside. There isn’t much room to the downside either because bankers will never restrict credit again. We will never see tightening credit until we’ve finally hit the borrowing wall. Given what is happening in the world with negative rates, I think people can end up borrowing a lot.

            I’m saving and waiting for the right time and right opportunity to buy a place that I can handle regardless of int rates. I don’t want to be cash poor so finding a home where I can still a good amount per month is my goal.

            And yes, RE agents are scalping way too much value relative to their input.

          • Oakville Rob 1 month ago

            Joseph – money stuck in China may be restricted or confiscated. When these people get money out of the country, even if its cut in half by depreciating assets, it’s still more than nothing. This is one of the reasons I site for prices rising at such an unfathomable rate. If they spend $10M on a house that was only worth $5M, when the prices retreat they still secured $5M that may have otherwise been nullified. I have seen investors swooping up 10 properties at once, only to let them languish, vacant for 3 years now. The houses rot, the neighborhood suffers, and local businesses lose their base.

            This is a crisis for average Canadians that is being ignored by the government.

    • Stetson Fortesque 1 month ago

      If prices never come down and there is no indication that they will, the conventional model of home-ownership will likely evolve into home-sharing or what urbanists are calling “Homer.” People will purchase just the amount of square footage they can afford and share their residence with other owners. Another possibility is building massive mobile home parks that could be slightly more affordable or honeycombed shaped pods as they have in Japan. There’s a number of viable options if people are open-minded about it.

      • Joseph 1 month ago

        Japan has over 100 million people. Is a fraction of Canada’s side.

        We’re the last country that needs anything you mentioned above (we’re large and have tiny population for our size). Things are a bit tight and out of whack right now, but it’ll eventually unwind. No need to take such drastic measures.

    • Canaduh 1 month ago

      Yes. That is why I am investing in a tulip farm . I believe the ROI from crop sales to Canadians will significantly out return any property appreciation during our lifetime. Say, you seem like you have a good head on your shoulders, how about a beautiful bunch of tulips before they go up in price?

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