Canada

Toronto Real Estate Still Leads The Country In The Decline of Sales, Ottawa Soars

Toronto Real Estate Is Still Leading The Country In The Decline of Sales, Ottawa Soars

Canadian real estate is seeing sales slow down across the country. Canadian Real Estate Association (CREA) numbers show new mortgage rules are likely biting into sales activity. Most of the country’s major markets are seeing declines, which will have significant consequences to the general economy.

Who Cares About National Sales Numbers?

We know, who gives a s**t about national sales numbers? Well, you should, even if you’re not looking for a home. In 2015, CREA estimated that each sale generated an additional $51,409 in spin-off economic activity. As sales increase, so does the economic activity in a region. Prosperous economies, mean prosperous local populations. Yay!

If that’s true, so is the opposite. Every sale that’s removed in contrast to year before, is income that’s not going to come in through spin-off activity. If a sale represented $51,409 in spin-off, a 10% reduction in sales would be $2.64 billion of activity businesses will have to make elsewhere. That creates a bigger problem when these sales are in the same economic region.

Now, we’re not advocating you go out and buy a house because it’s your patriotic duty. Your ability to worship service your debt should trump all. Instead, we’re pointing out that a lack of economic diversification has more consequences than people think about. Got it? Let’s do this.

Canadian Real Estate Sales Are Down Over 22%

Canadian real estate sales have made a significant decline compared to last year. CREA reported 41,983 sales in March, a 22.7% decrease compared to last year. Only 6 of the 25 largest markets saw an increase in sales compared to last year. That’s not great news.

Source: CREA. Better Dwelling.

Greater Toronto Areas Lead The Country For Losses

The largest decline in sales were observed in markets around Greater Toronto. Toronto saw 7,228 sales in March, a 40.2% decline compared to last year. Hamilton saw 1,009 sales, a 39.2% decline in sales. Niagara reported 541 sales, a 34.2% decline from last year. Macro folks are going to want to note that all three markets are in the same economic zone.

Source: CREA. Better Dwelling.

Ottawa Leads The Country For Gain In Sales

Not all markets are seeing declines. Ottawa, Sherbrooke, and Montreal all saw substantial increases in sales. Ottawa reported 1,674 sales, a 10.2% increase from last year. Sherbrooke reported 232 sales, a 7.9% increase compared to last year. Montreal reported 5,656 sales, a 6.4% increase compared to last year. Worth noting that despite the increase in sales, all three of these markets are currently underperforming the average national price increase.

A decline in home sales activity is expected, due to the changes in mortgage rules. As we’ve previously pointed out, 12% of mortgages issued last year would not have been approved under new OSFI B-20 Guidelines. You know, but maybe your real estate agent is right and that really good feeling they have about August trumps the math.

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47 Comments

  • Reply
    Bluetheimpala 1 month ago

    I wonder if holding the rate will add a little pop to May? I suspect there has been enough traction to influence behaviour and change the psychology leading to further declines but time will tell. More rate increases are coming it is a matter of when. Tick tock.

    • Reply
      Grizzly Gus 1 month ago

      If some of the key numbers are down YOY in May I think it will create a lot of panic. The industry has been playing the “stop comparing to record early 2017….not a normal market” card heavily.

      That being said, more and more news keeps coming out about people who committed financial suicide, eventual the masses will take note.

      https://globalnews.ca/news/3951652/interest-rates-canaa-housing-underwater/

      Starts off with an example of someone who lost playing the alt/community lender game. Then highlights which regions of the GTA have the largest percentage of people who are paying more than 50% of the income towards housing. Even 20% of dt condo owners are in the boat. Scary stuff

      • Reply
        vnm 1 month ago

        I was checking out some Buy vs Rent bank calculators. There are boxes to enter your “expected yearly rent increase” and “estimated capital appreciation” .
        These boxes only accept a project increase, they do not accept negative numbers.
        That is not an option, illegal, does not compute!

      • Reply
        Bob 1 month ago

        “The census tracts with the highest number of households with very high shelter cost-to-income ratios are in the Vancouver area.

        Of Canada’s 50 top census tracts for high shelter cost-to-income ratios, 31 are in Greater Vancouver.”

        This seems a little disingenuous to me. The issue in Vancouver is that the owners don’t report global income nor global wealth. Many of these properties were purchased with proverbial suitcases full of cash. There are zero-income ‘students’ dropping $20,000,000 cash for Shaughnessy mansions.

        The disconnect of price-to-income is very real and it’s a big deal for the community. The problem is the inability of non-wealthy locals to live here – and staff local businesses. Low reported incomes of those actually doing the buying is probably nothing to worry about.

        • Reply
          Mmr 1 month ago

          The same goes for Toronto. Ppl keep doing analysis with missing data they only focus Canadian income but 54 percent Toronto ppl are not born here they all immigrats. How many of them buy house where with money earn here? How many of them bring down payment from out side Canada? Every on has property and income back home. Cra and no has any tracking or idea. As long as you are missing all these days any analysis based on median income with real estate is just waste of time. Top of that downtown Toronto has almost 10 percent foreigners top of 54 percent immigrants that’s like two third are not even from Canada. And ppl wonder why income and real estate price don’t match. What a joke.

          • Grizzly Gus 1 month ago

            I get the fact that every rich person in the world wants to deal with ice storms in April, but I always assumed the average new immigrant didn’t have a lot of money. See a lot of first generation Canadians driving cabs and working at Tim Hortons, maybe that is for appearance purposes and they all do secretly have bank accounts in Panama.

          • vnm 1 month ago

            Exact same nonsense as spouted in the death throws of the last bubble.

            Crooks see other crooks around every corner.

            “It’s a well-known problem in epidemiology that if something’s a rare event, and you just try to ask how many people have done this, you will get incredible overestimates.”

        • Reply
          Grizzly Gus 1 month ago

          Right because non-wealthy people in Vancouver have all chosen not to come up with riskier ways to get into the market. 31 of the 50 are in Van yes……….. but where do you think the other 19 are located? Also, that is only the 50 regions with the highest cost vs income. Its not to say that there are not other neighborhoods that are disconnected. Look at the maps for GTA and GVA, how many of the neighborhoods do not have at least 10% of the residents paying OVER 50% of the income…….. Keep in mind even paying over 40% of your income is considered very risky. Canadians have been over extending themselves despite the fact we have had record low rates. Its not as obvious in Van yet because prices have still been rising (allows the over leveraged to get out easy) but in GTA we are starting to see some of the crap surface to the top.

          Stories like the Mattamy/Oakville buyers (who chose to hold existing property after committing to a pre con, assuming prices would rise) , the person in this story who could only qualify with an alt lender (assuming her home would rise in value and she would be able to refi with a normal bank), that bus driver from Oshawa who was devastated that she overpaid for a pre con home for her son now that phase 2 properties were being sold for less (all of her other properties had only gone up in value)……….. Are these people hiding their income?

          • Mmr 1 month ago

            Yes some are driving Uber and work at Tim’s. But out of six million if 3 million are not Canadian born here you saying all are poor and driving Uber? Canada only being skilled ppl even some
            Fall through odd job lot of them are wealthy. At the end who cares? Unless you provide analysis with full data or don’t. I can’t work for a company and predict all this bull shit results and then reality on the ground don’t reflect that. How do you explain Vancouver real estate price being so high for so long even there median income is half of city of Ottawa? Are you saying those million dollar house being bought by Tim Hortons working immigrants? You can predict results if you have right set of date we don’t. That’s why real estate prediction didn’t work since 2009.

          • Mmr 1 month ago

            Yes they definitely hide there income. Majority or almost everyone of immigrants don’t report there income in Canada. Keep bringing 350k immigrants who have advantage of tax cheat from the beginning and try to compete with them. Problem with our politics no one will talk about half a million ppl coming here and wonder why eberything is expensive. And cra only come after ppl who born here and being taxed to death. This won’t stop unless cra go after half of gta popilation and ask them to disclose there properties and incomes in there home
            Country as well. There are no way all these immigrants were homeless in there home country.

          • Grizzly Gus 1 month ago

            The key answer as to why they are so high, have stayed so high over the last ten years is interest rates. I don’t think any of the bears that started their warnings ten years ago anticipated rates would be held this low for that long.

            Now, back to that post, keep in mind those stats, are your income (fully stated or understated) vs your housing debt (costs). If these rich foreigners have so much cash why even take the debt? Because interest rates are so low that they could use their capital to get way higher returns elsewhere. For example buying multiple properties and just sitting back and watch them appreciate at a way higher rate then their debt servicing. Exact same motivation as those that took out HELOCS to buy investment properties. As rates rise and cost of debts goes up we will see how many of these people are able to cover themselves.

            Now are their people whose income is not reflective of their property.? 100%. This could be individuals with oversees wealth who do not declare income here, or those working for money launderers, this could be locals who have their down deposit and even monthly payments subsidized by their parents, it could also be people who have multiple income earners at their residence contributing to payments. (family or undeclared renter). Such individuals could be fine if rates go up and/or correction/crash were to occur, as long as nothing stops the flow of their oversees funds (recession in home country, capital controls, or new regulation to go after tax cheats), the flow of money from their parents does not decreases (parents have actual income generating assets or high wages rather than perceived home equity) and no disruption to the incomes of the additional contributors. Such individuals would skew the results as you and Bob pointed out.

            However, to say that because these results might be skewed we should ignore any information like this, is to feed into the narrative crafted by the RE industry………
            “local incomes no longer matter because all these wealthy people are dying to live in Toronto and Vancouver (if they don’t actually want to live here, then why wouldn’t the dump if prices start to go down). If you don’t buy today then you will be paying rent to the Chinese for the rest of your life.” (could be subsidizing you by a $1000 a month)
            And that narrative has worked wonders………… As i mentioned above, just look at some of the stories that are coming out around the GTA of people who took way too much risk because they thought prices couldn’t go down.

            And no not all immigrants are poor that come here. Lot’s of Canadians (2nd gen 6th gen, whatever) drive Uber and work at Tim Horton’s as well………………. just unfortunately some of them have managed to buy into this bubble as well………… that bus driver from Pickering who owned multiple properties for example.

          • Alistair McLaughlin 1 month ago

            Mmr, here is how I explain Vancouver real estate prices:

            https://globalnews.ca/news/4149818/vancouver-cautionary-tale-money-laundering-drugs/?utm_source=Article&utm_medium=MostPopular&utm_campaign=2014

            And that’s been going on since the early 1990s. Don’t mistake a long term process for permanence. If you think criminal money laundering and undeclared foreign income are going to support the market forever, then you have no business questioning anyone else’s analysis. Just ask Miami how that worked out for them in the 1980s. A market supported by criminal financiers is a market setting itself up for a massive collapse. Whether the process takes a decade or 30 years is immaterial. The longer it inflates, the harder it will fall.

      • Reply
        xelan 1 month ago

        Grizzly, imagine how many articles we will get if condo market slows down similar to detached segment.
        Mortgages data on 2017 condos is pretty bad, and it was before B-20 and 3 interest rate increases were implemented. This year’s data will be way way worse because nobody planned for B-20 when they bought their preconstructions 2 years ago. Huge number of people will be pushed to alt. lenders this year and pay 6%+ interest on their mortgage.
        And this is kind of OK while condo prices go up because people can refinance but if condo prices will decline we will definitely see avalanche of sad stories like we are hearing today.
        All eyes are on condo markets.

    • Reply
      Everyone Is An Expert 1 month ago

      Bluetheimpala,

      Not sure what you mean here? a Pop to the bubble or a pop up in sales/prices? as much as I hope you are right about about your suspicions, I am suspecting rate increases will not come into any scenario anytime soon because they know how risky it is for them to do so, considering a large amount of people that have to renew thier mortage terms.

      • Reply
        John 1 month ago

        The BoC overnight rate policy is not designed to protect people from their own stupidity.

        So while the mortgage market may be a consideration by Poloz et al., their mandate is maintaining inflation. The oil uptick alone is going to pump mega dollars into the economy.

        Dont bank on the Bank.

      • Reply
        Grizzly Gus 1 month ago

        I think we get March’s inflation readings tomorrow. Has been trending up and if it has jumped from February the bank may not be able to give households as much time to adjust.

      • Reply
        Yeah Right 1 month ago

        Expert. While I’m sure consideration was made to the knock on effect a rate hike would have on housing and personal credit defaults, the rate hold decision probably encompassed some pretty compelling macro data.

        Bear in mind that we are in NAFTA negotiations so with macro data on the surface necessitating a rate hike (employment, inflation, etc), we may come off as currency manipulators to the US at a negotiation table. A table where we don’t have many cards unfortunately and stakes are high.

      • Reply
        Bluetheimpala 1 month ago

        Pop in sales. Gives a cohort under pressure the ability to potentially buy undertake narrative of ‘rates stabailized, good time to buy now,’ At this point if sales and inventory keep moving inversely nothing will help pricing on volume. Be careful what you wish for, tempering policy to appease a bunch of pigs and possums will only result in more problems for the broader economy. We need the BoC to do what is right and be less political.

  • Reply
    Ian 1 month ago

    Considering we’re looking at a 30% drop, you might as well triple that number to $8 billion. Me thinks Ontario’s minimum wage hike isn’t going to be enough to make up that ground.

  • Reply
    Alistair McLaughlin 1 month ago

    The media here has been pumping the “Ottawa real estate is HOT!” narrative 24/7. The marketing – both implicit and overt – is directed squarely at Millennials, specifically naming “Millennials” several times during the broadcast. Saw an interview with a realtor on the noon CTV news on Monday. She had very detailed advice for precisely how parents should create a formal gift letter that guarantees their down payment gift is not a loan. She’s also arranging bus tours specifically for first-time Millennial homebuyers to visit various open houses.

    Brilliant strategy. Take the generation that, because of social media and other factors, is more sensitive to peer pressure and the herd instinct than their forebears, get them all on the same bus, then show them houses at the same time. I can imagine how it will play out. She’ll take them to a few over-priced dumps first. Then, as the tour goes on, the houses get progressively nicer. They’ll be told, “This place will go fast. If you like it, you might want to make an offer right now. Don’t be limited to the asking price. If you really want it, you might have to offer a lot more.” The competitiveness and FOMO will be raised to a fevered pitch. Couples will scurry into their own little private huddles. They’ll phone their parents.

    As soon as the first sale is made, she will l have guaranteed sales for every house she visits until the end of the day. Every sale after that first one will be just another domino. Who wants to be the loser couple getting off that bus who didn’t buy a house that day? All the other couples chatting excitedly about their new homes, how they’re going to furnish them, where they’re going to put the second TV, and you’re going to get off the bus and go home empty-handed? It’s bloody genius.

    • Reply
      Grizzly Gus 1 month ago

      Well if they can afford that place on their salary why can’t I? If everyone is doing it, then the government cant just let it crash………….

    • Reply
      vnm 1 month ago

      For prospective buyers in the booming world class city that is now Ottawa, with the spreading contagion it actually makes sense to jump on the bandwagon now due to the spreading contagion Higher average incomes, 93k vs 78k in Toronto, many with government pensions and health benefits … and house/condo prices not much more than half.
      Happy for my niece and nephew though, they bought in Ottawa last year. Appears we have a bona fide real estate genius in the family.
      Not good news for Toronto since the investment dollars are going elsewhere. Now we’re facing a recessionary cycle with record debt and plummeting sales.

      • Reply
        Mmr 1 month ago

        Ottawa will have zero impact on investment in Toronto. My family from Ottawa and we invested over 20 property in Toronto last 10 year that include my parents brothers cousins etc. Every one I know from Ottawa has investment property in Toronto. Ottawa is 10 times bigger in area size then Toronto with population less then one sixth. Top of that no immigrats come here and no business either. It’s like Calgary or Edmonton depend on one industry all federal jobs once liberals are gone this city will get screwed no other industry to help it. Just what happen when Harper was here. Time is up for liberals one more year then price at Ottawa will drop by 50 percent once conservatives clear of the mess and lay off all these ppl from payroll.

        • Reply
          Dirty City 1 month ago

          You have zero idea of how the government or the country works. I see why you left Ottawa, the idiots usually go to Toronto.

          • Mmr 1 month ago

            I have all the idea how it works. Once conservative are elected government ppl will be all Uber driver that’s all they good for. I miss Harper. Can’t wait for selfie junior pm to go fuck him self and take all these incompetent government lazy ppl take with him and stop waste our tax payer money for good. Enjoy your lazy ass job while it last not too much time left.

        • Reply
          Zhang 1 month ago

          Mmr. Why you argue with these idiots? they are not investors. they have no money and just jealous of investors and try to rationalize crash. They read a lot but don’t take any action. they are sheep. we are wolves. they don’t understand immigrant sacrifice for owning home.

          • Mmr 1 month ago

            I should stop. I stop reading these all this bull shit analysis here now have to stop argue at one point. I was taking things seriously at one point but seems none of there analyses ever show any realistic result in the ground. Can you imagine if these ppl working for a real company and always forcasting wrong for last 10 year? I am sure they will get rewarded with bonus and promotion.

          • Alistair McLaughlin 1 month ago

            And Hot Sauce/Ketchup Chips/Frank Diesel makes his appearance, under yet another screen name. How’d your bankruptcy hearing go Hot Sauce?

          • Alistair McLaughlin 1 month ago

            You probably should stop Mmr. You sound like a reasonable guy most of the time. But you constantly try to convince us – or maybe just yourself – that your Toronto condos are a sound investment. They were in 2010. They probably are not anymore. Instead of arguing with us, you should be unloading them and investing the proceeds in less inflated markets. But you don’t want to hear that. So why are you hear exactly? Nobody who reads and comments here regularly is going to endorse Toronto condos as a sound investment in 2018. No one except for Zhang/Hot Sauce/Ketchup Chips, and he’s certifiably insane and bankrupt.

          • Alistair McLaughlin 1 month ago

            they don’t understand immigrant sacrifice for owning home.

            You mean people like this?

            https://globalnews.ca/news/3951652/interest-rates-canaa-housing-underwater/

            Here’s the thing Ketchup – many of us here fully understand just what people, be they immigrant or native-born, are sacrificing in order to purchase real estate. That very desperation to own a home at any cost is precisely what’s going to bring the whole thing crashing down. It’s already happening in the Toronto detached market.

          • Grizzly Gus 1 month ago

            Weird, in the US crash their have been a bunch of reports how it was minorities and immigrants that suffered the most

          • Zhang 1 month ago

            Alistair. you rental loser in Ottawa. no money. your words empty. you work for BD. you phony. you fake. you post everyday because it is your job. you BD professional troll/commenter like Blue, Grizz. You stir pot to make coin. we investors make big money. this clickbait website. no analysis. copy paste from other legitimate websites. run by brown guy with name stephen. no brown guy name stephen – what he try to hide – he phony.

          • vnm 1 month ago

            You mean the nearly extinct animals that survive by scavenging for garbage?
            And alas, like you, they have no self-awareness.

          • Zhang 1 month ago

            VNM. I think you loser. you investor or you recycle known information. you small chicken wing in game. I make dolla you make penny. go home and drink beer. put on leaf jersey and watch with ugly girlfriend.

          • vnm 1 month ago

            I rest my case.

          • Paul Bernardo 1 month ago

            Zhang, I think I left my cigarettes on your bunk last night. Do you think you could drop them off at my cell tonight before lights out? Thanks.

          • Dirty City 1 month ago

            “I think you loser. you investor or you recycle known information. you small chicken wing in game. I make dolla you make penny. go home and drink beer. put on leaf jersey and watch with ugly girlfriend.”

            So funny! This is exactly like that guy on Silicon Valley. Props man.

  • Reply
    Peter Woods 1 month ago

    Fomo limo

  • Reply
    xelan 1 month ago

    I think I’m getting closer to understanding Toronto & Vancouver house prices.
    And the answer is – they don’t really differ much.
    If someone is interested here are my thoughts. In order to understand those markets we should zoom out a little and compare GTA vs GVA. I live in GTA so I know how interconnected it is so it’s really can be considered just as 1 city. I guess similar is true for GVA as well.
    And if we compare GTA vs GVA real estate prices there is not much of a difference really.

    Average property price: $802k (GTA) vs $947 (GVA)
    Median property price: $695k vs $750k

    Average price is significantly higher in Vancouver because it’s much more foreign money pouring into the area which bumped up prices of luxury properties but Median prices are much more closer to fundamentals and the difference is not so big here, really.

    So it looks like there is no magic about Vancouver like massive undisclosed incomes or corporate purchases of Real Estate, it’s just Vancouver is much more attractive place in GVA than Toronto in GTA.

    • Reply
      Alistair McLaughlin 1 month ago

      https://globalnews.ca/news/4149818/vancouver-cautionary-tale-money-laundering-drugs/?utm_source=Article&utm_medium=MostPopular&utm_campaign=2014

      Lot’s of money laundering in both cities, but it is endemic in Vancouver, and has been since the early 1990s.

    • Reply
      vnm 1 month ago

      And multiplying by temperature and subtracting rain, it’s close to dead even!

    • Reply
      Jay 1 month ago

      It’s more attractive, sure, but there’s absolutely no jobs that can sustain these prices. I love to share this little graphic… but all throughout my professional career (here in Vancouver), the mantra has always been “If you want to make more money, go east”.

      https://i.redditmedia.com/yKoG1Y2NeFA1V1KNF0XIdRwURfiV0wVtp5mOWyLy-ic.jpg?w=801&s=07d0599e76accdcbacd908a09b242ad4

      It’s not just for the tech sector either, wages suck in EVERY sector in Vancouver. So okay, Vancouver is good enough that companies can pay whatever the fuck they want and people will still live here. So where’s all this money coming from?

      Well, why not use the same line of thought into debt. People are more willing to go into massive, and dangerous amounts of debt just to live here, because it sure hell isn’t
      a) foreign investors (anymore, well officially anyways)
      b) wages and high paid professionals pushing housing prices up.

      my2cents

      • Reply
        Alistair McLaughlin 1 month ago

        “Very high” quality tech talent available for $60K USD per year. If that isn’t a sad pronouncement of the Canadian jobs market, I don’t know what it. The answer to that is always , “Yabutt we have healthcare and low crime rates!” As though that can make up for shit salaries, high taxes and insane housing costs.

        The Ontario government was boasting – yes, boasting – that if Amazon HQ were put in Toronto, Amazon would save $1.5 billion per year in salary and benefits costs. A big chunk of that was healthcare costs. But the biggest chunk was salaries – partly due to the weak loonie, and partly because tech salaries in Toronto are absolute shit in comparison to US cities. We’re back to the 1990s again, when politicians bragged about our devalued currency and cheap wages as if they were selling points.

        • Reply
          vnm 1 month ago

          Truly disturbing. And I wouldn’t put too much stock in the future of healthcare or public safety the way things are heading. Seems like a daily shooting or stabbing reported daily in the Toronto papers.
          The wait time in QC is now more than 1,000 days to be assigned a GP when you register. There’s always the emergency room, but it’s not all that much quicker.

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