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Volatile or Steady? Opinions Are Varied about Canada’s Housing Market

Volatile or Steady? Opinions Are Varied about Canada’s Housing Market
3 min. read

Depending on whom you ask, Canada’s housing market may still be at high risk or it may be out of the danger zone. With statistics that seem to prove both points of view, the average homebuyer or seller can easily be confused by varying opinions. The truth is, fortunately, simpler than it seems: the Canadian housing market can be better understood when looked at provincially rather than nationally.

The Bank of Montreal is confident about recovery

Doug Porter, the Chief Economist at the Bank of Montreal is confident that the national housing market has righted itself after years of steep decline. He notes that policymakers no longer consider the housing market to be a major “source of concern,” and went so far as to describe it as a “bit of a yawner.”

His opinion is based partially on data released by Statistics Canada that shows that Canadian household debt has levelled off. National wealth is up overall, with real estate wealth steadily increasing in every quarter of 2017. After a peak in 2008 and a trough in 2016, the ratio of debt to assets has levelled out at around $1.69 of debt for every disposable dollar. This is good news for anyone concerned about the level of Canada’s household debt.

The stats further show that total credit market borrowing has slowed for the second quarter in a row, with households borrowing a total of just under $20 billion, down from just over $22 billion in the previous quarter.

A tale of two countries: Up and down and all around

When national real estate statistics are looked at out of context, just about any story can be told. For example, Statistics Canada’s data shows that consumer credit has increased by $1.7 billion over the previous quarter, but this must be considered in conjunction with the decrease in mortgage loans of more than $3.5 billion.

Total Canadian home sales in August were up slightly compared to July – and for the fourth month in a row – but year-over-year, non-seasonally adjusted sales were down nearly 5%, partially due to the steep declines in British Columbia real estate.

The Canadian housing market from a global perspective

Oxford Economics recently released a global study in which they named the Canadian housing market as in “imminent risk” of a “major price correction.” In their report Assessing the Risks from High House Prices, they ranked the riskiest housing markets in the world. Canada came in third, behind only Australia and Sweden. New Zealand and Hong Kong rounded out the “top” five.

To back up their ranking, Oxford Economics pointed out that Canada’s real estate prices are currently 173% higher than their historical average. Their conclusion was that this makes Canada the third most overvalued housing market in the world.

Researchers further noted that their exhaustive study of global housing prices from 1970 – 2013 concluded that when housing prices went up by 35% or more, there was a 75% likelihood that a price correction was going to occur within the next five years.

Macro vs micro: A closer look at provincial and city statistics

While national real estate trends may interest policymakers, most homeowners and homebuyers are likely to be more affected by provincial real estate changes, or even citywide data. Looking at these smaller Canadian areas paints quite a few different pictures.

As we’ve previously reported, Calgary is experiencing a slow housing recovery at the same time as the growth of Victoria’s real estate market has been moderating. Saskatoon real estate has cooled off in 2018 with fewer real estate listings, Mississauga real estate picked up in August, and Windsor housing sales were steady in July though prices surged.

Keeping a close eye on how these cities continue to grow or decline is likely to offer a more accurate insight than can be obtained by looking at the country as a whole.

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