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Canadian House Price Crash


sancho panza

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Vancouver moves to 16 months supply in terms if detached houses for sale/transactions

Stress test getting blamed,not high prices/debt deflation natch.

 

https://www.huffingtonpost.ca/2019/02/04/vancouver-housing-prices-down_a_23661096/

There's no shortage of homes available for sale these days in Vancouver, and those hoping for better bargains in one of the world's least affordable housing markets may get their wish soon.

The latest data from the Real Estate Board of Greater Vancouver (REBGV) shows the number of homes for sale in the region jumped by 27.7 per cent in January, compared to the same month a year earlier.

From December to January, the number of homes for sale jumped a massive 244 per cent. While it's normal for the number of houses for sale to jump after the holidays, this is an unusually large increase. Last year, the increase was around 100 per cent.

Meanwhile, sales dropped 39.3 per cent in January, compared to a year earlier, REBGV reported.

Taken together, this means Vancouver's housing market is now a "buyer's market" for all housing types. Only 6.8 out of every 100 detached homes on the market sells in any given month. For townhouses, there are 11.9 sales for every 100 on the market, and there are 13.6 condo sales for every 100.

What's more, the city is headed for a deluge of new housing units set to hit the market over the next couple years, giving buyers even more options. Some 40,000 new housing units are expected to hit the market over the next two years.

Earlier on HuffPost Canada:

 

People aren't feeling the need to rush into buying a house in Greater Vancouver these days, REBGV president Phil Moore said.

"Realtors are seeing more traffic at open houses compared to recent months, however, buyers are choosing to remain in a holding pattern for the time being," he said in a statement.

Prices are coming down for all property types, with the benchmark detached home price coming down 9.1 per cent in the past year to $1.45 million, down around $150,000 from a year ago.

Still, for homeowners who bought before the slowdown of the past few years, that represents a sizeable gain.

Condo prices are down 1.9 per cent in the past year, to $658,600, but have fallen 6.6 per cent in the just past six months.

Stress test takes the blame

In what is now a common refrain, the city's real estate board is putting the blame squarely on the mortgage stress test that was put in place a year ago.

"Economic fundamentals underpinning our market for home buyers and sellers remain strong. Today's market conditions are largely the result of the mortgage stress test that the federal government imposed at the beginning of last year," Moore said in a statement.

"This measure, coupled with an increase in mortgage rates, took away as much as 25 per cent of purchasing power from many home buyers trying to enter the market."

According to Royal Bank of Canada's index of housing affordability, detached homes are considerably more expensive, relative to incomes, than they have ever been in Vancouver. Condo prices are at their highest levels since a real estate bubble three decades ago, but are not at record highs.

"Demand has weakened so much that the few buyers out there are now able to get some price concessions from sellers," RBC said in a report issued in late December. "We expect prices to decline somewhat in 2019."

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Any time someone brings up overpopulation or limited amount of land in UK as causes of high house prices, my first response is Canada and Australia. 

These are some of the least populated places of the world, yet cheap finance managed to blow the biggest price bubbles.

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3 minutes ago, Bear Hug said:

Any time someone brings up overpopulation or limited amount of land in UK as causes of high house prices, my first response is Canada and Australia. 

These are some of the least populated places of the world, yet cheap finance managed to blow the biggest price bubbles.

It’s almost as if the inflation of assets such as property is deliberate. 

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1 hour ago, Bear Hug said:

Any time someone brings up overpopulation or limited amount of land in UK as causes of high house prices, my first response is Canada and Australia. 

These are some of the least populated places of the world, yet cheap finance managed to blow the biggest price bubbles.

Population over expansion affects quality of life. At least in Canada or Australia you get a decent house and garden for you bubble money. UK you get a rabbit hutch about big enough to swing a cat if you're lucky for your bubble money. 

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8 hours ago, Bear Hug said:

Any time someone brings up overpopulation or limited amount of land in UK as causes of high house prices, my first response is Canada and Australia. 

These are some of the least populated places of the world, yet cheap finance managed to blow the biggest price bubbles.

The balance between supply and demand cannot be ruled out though and it is not just body count that has an effect, something common to both Aus and Canadian market is the high number of wealthy Chinese that have participated in both markets, both at a purely speculative financial level and inward migrant/bolthole/offshore wealth protection measure for the Chinese and both countries offering pretty much unlimited participation in those respects. In the UK London has had at least one blip of Russian money mentioned as a spruce for an insurgence in that market IIRC. Obviously the biggest factor is the the availability of cheap credit but the UK as a whole cheap credit, landlording and net immigration of 500K a year and building 100K houses population increase only exacerbates the problem both directly and has encouraged more landlording as the perceived demand is only going one way.   

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5 minutes ago, onlyme said:

The balance between supply and demand cannot be ruled out though and it is not just body count that has an effect, something common to both Aus and Canadian market is the high number of wealthy Chinese that have participated in both markets, both at a purely speculative financial level and inward migrant/bolthole/offshore wealth protection measure for the Chinese and both countries offering pretty much unlimited participation in those respects. In the UK London has had at least one blip of Russian money mentioned as a spruce for an insurgence in that market IIRC. Obviously the biggest factor is the the availability of cheap credit but the UK as a whole cheap credit, landlording and net immigration of 500K a year and building 100K houses population increase only exacerbates the problem both directly and has encouraged more landlording as the perceived demand is only going one way.   

Good post. It used to be that countries would very strongly regulate foreigners buying property. Looking at what’s happened, there is no surprise to that. The surprise is that the rules were relaxed to allow housing to be used as a commodity and store of wealth. 

Huge swathes of London are dark after sundown because property is bought and left empty. Madness, just madness. 

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16 hours ago, onlyme said:

The balance between supply and demand cannot be ruled out though and it is not just body count that has an effect, something common to both Aus and Canadian market is the high number of wealthy Chinese that have participated in both markets, both at a purely speculative financial level and inward migrant/bolthole/offshore wealth protection measure for the Chinese and both countries offering pretty much unlimited participation in those respects. In the UK London has had at least one blip of Russian money mentioned as a spruce for an insurgence in that market IIRC. Obviously the biggest factor is the the availability of cheap credit but the UK as a whole cheap credit, landlording and net immigration of 500K a year and building 100K houses population increase only exacerbates the problem both directly and has encouraged more landlording as the perceived demand is only going one way.   

I agree that everything is interconnected but... would Chinese/Russians still invest in a market where locals refuse/can't afford to participate and there is little potential for growth?  I am not so sure.  Anyway, looks like the tide is turning, just have to wait now.

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8 hours ago, Bear Hug said:

I agree that everything is interconnected but... would Chinese/Russians still invest in a market where locals refuse/can't afford to participate and there is little potential for growth?  I am not so sure.  Anyway, looks like the tide is turning, just have to wait now.

Absolutely, relative returns/losses of different sorts are not the only goal, a store of wealth of some sorts with low tax is part of it. Chinese, huge gamblers anyway generally so it goes with the territory - speculating a few gains made in China outside part of it, but property outside of China a potential bolt hole should the party decide to come after larger slices of tax or instigate wide scale tax investigations - some of which have already occurred so offshoring money an end in itself too. London has been a home for Russian dirty money since the wall came down. It is not just about return on money, residency and a "safe" location go with it. London being perceived as not quite so safe as it was might change the trend a bit in that respect.

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14 hours ago, Bear Hug said:

I agree that everything is interconnected but... would Chinese/Russians still invest in a market where locals refuse/can't afford to participate and there is little potential for growth?  I am not so sure.  Anyway, looks like the tide is turning, just have to wait now.

I think tehy'll pull out when prices start dropping.You also don't know if they've leveraged with a foreign sourced loan

On 14/02/2019 at 07:56, onlyme said:

The balance between supply and demand cannot be ruled out though and it is not just body count that has an effect, something common to both Aus and Canadian market is the high number of wealthy Chinese that have participated in both markets, both at a purely speculative financial level and inward migrant/bolthole/offshore wealth protection measure for the Chinese and both countries offering pretty much unlimited participation in those respects. In the UK London has had at least one blip of Russian money mentioned as a spruce for an insurgence in that market IIRC. Obviously the biggest factor is the the availability of cheap credit but the UK as a whole cheap credit, landlording and net immigration of 500K a year and building 100K houses population increase only exacerbates the problem both directly and has encouraged more landlording as the perceived demand is only going one way.   

Any depopulation of the UK could have a disproportionate effect on the price of shelter.

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Somewhere in the maths on UK house prices is the assumption that untold millions who can scavenger together £200 for a Romanian passport can freely drive their old bangers to Calais, board the train and be entitled to Housing Benefit when they get here. The day that tide stops rising around our necks we start to find out who isn't wearing trousers.

I was hoping for a 30% correction the day after the referendum, was gunning to start making offers, but TPTB decided we were going to have to wait for years while they fannied about.

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  • 4 weeks later...
sancho panza

https://wolfstreet.com/2019/03/14/the-most-splendid-housing-bubbles-in-canada-deflate/

The Most Splendid Housing Bubbles in Canada Deflate

by Wolf Richter • Mar 14, 2019 • 4 Comments • Email to a friend

How do they stack up against the most splendid housing bubble in America? Holy cow!

Canadian housing markets are in a category of their own. No housing market in the US – no matter how crazy Housing Bubble 1 was, which began to implode in 2006, or how crazy Housing Bubble 2 is or was – can hold a candle to the most splendid housing bubbles in Canada. Instead of a Financial Crisis and a mortgage crisis and Housing Bust 1, the bubbliest Canadian markets only had a little-bitty dip, and within months were back on track to what would be an 18-year housing boom that is now coming undone.

Vancouver:

In the Vancouver metro, home prices fell 0.7% in February from January, and are down 3.9% from the peak in July 2018, according to the Teranet-National Bank House Price Index. This 3.9% decline in seven months was the sharpest seven-month decline since February 2013:

Canada-house-price-Teranet-2019-03-13-Va

From January 2002 to the peak in July 2018, the index soared 316%, the biggest increase of any major housing market in Canada over this period — and as we will see in a moment, far more splendid than anything the US has to offer. When something is up 316% (the index for Vancouver soared from 70.7 in January 2002 to 294 at the peak in July 2018), it means that it more than quadrupled.

The Teranet-National Bank House Price Index tracks the rate of change of single-family house prices, based on “sales pairs,” similar to the S&P CoreLogic Case Shiller index for US housing markets. It compares the sales price of a house in the current month to the prior transaction of the same house years earlier, based on property records (methodology). Using “sales pairs” frees the index from the issues that plague median-price indices and average-price indices.

So now let’s have some fun and let’s compare Vancouver to the crazy insane mind-blowing Housing Bubble 1 and Housing Bubble 2 in the five-county San Francisco Bay Area that I feature prominently in the Most Splendid Housing Bubbles of America.

Since the Case Shiller Index and the Teranet-National Bank HPI both use “sales pairs” as their method of tracking price changes, it makes them comparable. To do that, I converted the index data of price changes into “percent change from January 2002.”  So this tracks the same data, but is denominated in “%-change,” and the chart looks the same. I did this for Vancouver and the San Francisco Bay Area, which allows me to put both indices on the same %-change scale on the same chart.

Holy Cow!

Vancouver house prices soared 316% since January 2002 through the peak (July 2018); San Francisco Bay Area house prices soared 121% through the peak (November 2018). And what we get is a chart that shows how the majestically splendid housing bubble in Vancouver (black) totally crushes, annihilates, and ridicules the crazy insane mind-blowing house price increases in San Francisco (red):

Canada-house-price-Teranet-2019-03-13-Va

Toronto:

Staying on the same scale to show how housing markets in Canada vary, with less bubbly markets showing more white space, we move on to Toronto. House prices fell 0.2% in February and are down 4.0% from the peak in July 2017. Mild as it seems, it was the steepest 19-month decline since May 2009.

From January 2002 through the peak in August 2017, the index skyrocketed 218%. That’s huge. It means house prices more than tripled. But it’s not even in the same ballpark as Vancouver, where house prices more than quadrupled. So in the chart below, there is a little more white space above the index. Note the utterly nutty spike from January 2016 through July 2018, peaking with a 40% year-over-year gain:

Canada-house-price-Teranet-2019-03-13-To

I converted this Toronto index to “percent-change since January 2002” and compared it to the crazy insane mind-blowing housing bubble in the San Francisco Bay Area. And Toronto just blows away the Bay Area for another holy-cow moment:

Canada-house-price-Teranet-2019-03-13-To

Montreal:

In Montreal, home prices ticked up to a new record in February, the only city in the 11-city index to see a month-to-month gain and a new record. The index is now up 158% from January 2002, and even this gain, which seems rather lousy compared to Vancouver’s 316% gain, beats San Francisco’s gain (121%) by a big margin. But the white space is beginning to get ample:

Canada-house-price-Teranet-2019-03-13-Mo

The Montreal index never experienced any kind of measurable dip. It trucked right along with San Francisco up through Housing Bubble 1. But during the Financial Crisis, when the San Francisco index imploded, the Montreal index just kept on trucking with the cruise control set on max, varying the speed only slightly for seasonal reasons.

Calgary:

The housing market of oil-boom-and-bust town Calgary experienced a blistering boom in 2005 to mid-2007, along with the oil boom. When the price of oil collapsed, the housing market went south. Then there was another oil boom and the index reached a new peak in October 2014, at the time 140% up from January 2002.

And you know what’s coming. That oil boom too turned into a bust in the fall of 2014, and home prices have since zigzagged lower. In February, the index was down 6.3% from its peak in October 2014. But it remains 124% up from January 2002. So even oil-bust town Calgary is beating San Francisco:

Canada-house-price-Teranet-2019-03-13-Ca

No magic involved.

These home prices in Canada are no miracle. The index measures how the price of the same house changes over time. This house didn’t get bigger or better or more opulent. It just got older.

What has changed in a major way is the purchasing power of the Canadian dollar with regards to assets, particularly with regards to homes: This purchasing power has plunged. And what you’re seeing here are the effects of asset price inflation, or more precisely home price inflation.

These “sales pair” indices are a good measure of inflation for home prices, as they track the price changes of the same house, just like consumer price indices are a measure of consumer price inflation by tracking price changes of individual items. No magic involved – just the loss of purchasing power of the Canadian dollar, and thereby the loss of purchasing power of Canadian labor that is paid in these dollars.

The San Francisco Bay Area and Seattle lead with biggest multi-month drops since 2012; San Diego, Denver, Portland, Los Angeles decline. Others have stalled. A few eke out records. Read…  The Most Splendid Housing Bubbles in America Get Pricked

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Couple of things to add to that interesting post.

1. Montreal is coming from a lower base because:

- prior seperatism movement (now on the wane)

- higher land taxes (still going strong)

2. BoC are rumoured to be extending the max term from 25 to 30 years, Poloz is truly the bastard son of Carney

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https://wolfstreet.com/2019/04/12/the-most-splendid-housing-bubbles-in-canada-deflate-march-update/

In Greater Vancouver, BC, Canada, house prices fell 0.5% in March from February, the eighth month in a row of declines, according to the Teranet-National Bank House Price Index released this morning. It was the sharpest eight-month decline since February 2013. The index is now down 4.3% from the peak in July 2018. And it’s down 2.1% compared to March last year.

This housing market had been on an extraordinary ride: From January 2002 to the peak in July 2018, the index skyrocketed 316% — meaning that prices more than quadrupled. And some of those gains are now unwinding:

 

Canada-house-price-Teranet-2019-04-12-Vancouver-San-Francisco-.png

Toronto:

House prices in the Greater Toronto Area fell 0.3% in March from February and are down 4.3% from the peak in July 2017, the steepest 20-month decline since May 2009.

From January 2002 through the peak in July 2017, the index soared 218% — meaning that house prices more than tripled. But that pales compared to Vancouver, where house prices more than quadrupled. I left the charts on the same scale, and so the Toronto chart below shows more white space. Note the totally crazy spike from January 2016 through July 2018, topping out at a 40% year-over-year gain:

Canada-house-price-Teranet-2019-04-12-Toronto-San-Francisco.png

Montreal:

The Teranet House Price Index for the metropolitan area of Montreal inched up to a new record in March and is up 159% from January 2002, without having experienced a noticeable dip over the 18 years. What Financial Crisis? Even this 159% gain, as lackadaisical as it was compared to Vancouver, blows away San Francisco’s gain of 121%. But note how the white space is starting to dominate the chart:

Canada-house-price-Teranet-2019-04-12-Mo

Calgary:

The Calgary housing market is dominated by oil booms and oil busts. When the price of oil collapses, the housing market goes south. House prices surged through the oil boom till mid-2007. When the price of oil collapsed, house prices went south. This was followed by another oil boom that powered the index to a new peak in October 2014, up 140% from January 2002. Then, as oil prices collapsed, house prices began to drop.

In March, house prices fell 0.5% from February and were down 7.0% from the peak in October 2014, according to the Teranet House Price Index. But it remains 123% up from January 2002 and is still beating San Francisco. And white space has taken over:

Canada-house-price-Teranet-2019-04-12-Calgary-San-Francisco.png

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46 minutes ago, Zanu Bob said:

https://wolfstreet.com/2019/04/12/the-most-splendid-housing-bubbles-in-canada-deflate-march-update/

In Greater Vancouver, BC, Canada, house prices fell 0.5% in March from February, the eighth month in a row of declines, according to the Teranet-National Bank House Price Index released this morning. It was the sharpest eight-month decline since February 2013. The index is now down 4.3% from the peak in July 2018. And it’s down 2.1% compared to March last year.

Montreal:

 

The Teranet House Price Index for the metropolitan area of Montreal inched up to a new record in March and is up 159% from January 2002, without having experienced a noticeable dip over the 18 years. What Financial Crisis? Even this 159% gain, as lackadaisical as it was compared to Vancouver, blows away San Francisco’s gain of 121%. But note how the white space is starting to dominate the chart:

Canada-house-price-Teranet-2019-04-12-Mo

 

The Montreal reference is pretty ill-informed. Montreal had a separatist movement, is far more socialist and taxes land more. It also doesn't have as many English speaking people, who are generally more into unearned rentier gains.

Montreal is on the up, it's not like Vancouver, people have actual jobs here realated to *shock* making stuff.

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  • 1 month later...
sancho panza

https://wolfstreet.com/2019/05/15/the-most-splendid-housing-bubbles-in-canada-deflate-further/

The Most Splendid Housing Bubbles in Canada Deflate Further

by Wolf Richter • May 15, 2019 • 1 Comment • Email to a friend

Vancouver prices drop. Toronto, down 3.7% from peak, but flat for 10 months. Winnipeg house prices plunge most since at least 1990. Quebec City flat for 6 years.

In Greater Vancouver, BC, Canada, house prices fell 0.4% in April from March, the ninth month in a row of month-to-month declines, according to the Teranet-National Bank House Price Index. The index is down 4.7% from the peak in July 2018, the sharpest nine-month decline since July 2009. And it’s down 2.8% from April last year. One of the most splendid housing bubbles in the world is now deflating before our very eyes, after prices had skyrocketed 316% from January 2002 to the peak in July 2018 – meaning prices had more than quadrupled in 16 years:

Canada-house-price-Teranet-2019-05-14-Va

The Teranet-National Bank House Price Index tracks single-family house prices, based on “sales pairs,” comparing the sales price of a house in the current month to the last sale of the same house years earlier (methodology). Using “sales pairs” eliminates the issues that affect median and average price indices but has its own limitations. These median and average house prices, which are much more volatile, are now showing much sharper price declines for Vancouver.

Because the Teranet index uses a similar methodology of “sales pairs” as the S&P CoreLogic Case Shiller index for US housing markets, the indices produce comparable metrics. So let’s compare Vancouver’s housing bubble to the also deflating housing bubble in the San Francisco Bay Area. Splendid v. Splendid. The chart below shows the data of Vancouver (black columns) and San Francisco (red columns), with both indices converted into “percent change from January 2002.”

Canada-house-price-Teranet-2019-05-14-Va

As the chart above shows, Vancouver’s housing market dipped briefly during the Financial Crisis while San Francisco’s market went into a hard four-year downturn, as the US housing bust morphed into the Mortgage Crisis that contributed to the Financial Crisis.

Toronto:

The House Prices Index for the Greater Toronto Area (GTA) ticked up 0.3% in April from March, after three months in a row of declines, but was down 3.7% from the peak in July 2017. Since July 2018, the index has been essentially flat.

From January 2002 through the peak in July 2017, the index skyrocketed 218% — in other words, house prices more than tripled in 16 years, a pale imitation of Vancouver’s house price bubble, where the index had more than quadrupled. The charts are the same scale, so the Toronto chart below has more white space. Note the crazy two-year spike through July 2018, when year-over-year gains maxed out 40%. Just nuts:

Canada-house-price-Teranet-2019-05-14-To

Winnipeg:

The house price index for the Winnipeg metro area dropped a steep 2.0% in April from March, and is down 4.2% from the peak in September 2018, the steepest seven-month decline in the data going back to 1990! The index is now below where it had first been in July 2016. The chart is on the same scale as Vancouver’s chart, so note the white space, in comparison:

Canada-house-price-Teranet-2019-05-14-Wi

Winnipeg is a perfect example of why housing bubbles are by definition irrational – and no matter how hard you try to rationalize them, they remain irrational. Unlike Vancouver and Toronto, the Winnipeg metro is not huge (population of about 800,000), and there is plenty of land around it. The biggest city nearby is Grand Forks, North Dakota, USA, connected by a straight highway south through beautifully wide-open land.

And yet, the house price index had soared 195% from January 2002 through September 2018 – meaning that prices had nearly tripled in 16 years. Or if you squint a little, you see that the index first nearly reached that level back in November 2014. So, it nearly tripled in those 12 years!

And during the Financial Crisis in the US, Winnipeg’s house prices just hiccuped for a few months before going on their merry way higher. None of the hackneyed rationalizations of housing bubbles apply, and yet, it had a housing bubble.

Montreal:

Home prices in the metropolitan area of Montreal inched down in April from a record in March and are flat for the three-month period, according to the House Price Index. The index is up 159% from January 2002. Even during the Financial Crisis, the index didn’t dip. But this 159% gain in 16 years doesn’t measure up to Vancouver’s crazy housing bubble; and white space is dominating the chart:

Canada-house-price-Teranet-2019-05-14-Mo

Quebec City:

The house price index for the Quebec City metro ticked down in April from March, continuing its up-and-down game that it has assiduously played since mid-2013, essentially going nowhere for six years, after a blistering 159% increase in the 11+ years from January 2002 through July 2013:

Canada-house-price-Teranet-2019-05-14-Qu

Calgary:

Oil booms and busts dominate the Calgary housing market. When the price of oil surges for years, the housing market booms. When the price of oil enters one of its infamous multi-year plunges, the housing market fizzles. This time around, the price of oil started its collapse in mid-2014, and the House Price Index reacted with a lag of a few months. The index peaked in October 2014, up 140% from January 2002. Then the index followed oil lower.

In April, the index fell another 0.3% from March, is down 7.3% from the peak in October 2014, and is back where it had first been in July 2007, 12 years ago. It remains up 123% from January 2002, a mere fraction of Vancouver’s 316% gain, and white space has taken over the chart:

Canada-house-price-Teranet-2019-05-14-Ca

As always with these house price indices that are based on “sales pairs” – whether the Teranet-National Bank House Price Index in Canada or the S&P CoreLogic Case Shiller index in the US: They measure the purchasing power of the dollar in a local market with regards to the same house over time. When the price of a house doubles, the house doesn’t double in size or become twice as opulent (normally, though there are exceptions). What has changed is the purchasing power of the dollar with regards to houses. This turns these indices into a measure of house price inflation, just like other indices are a measure of consumer price inflation. And in some cities in Canada, but not all, house price inflation spiraled completely out of control — and is now reversing bit by bit.

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  • 1 month later...
sancho panza

https://wolfstreet.com/2019/07/08/update-on-the-housing-bust-in-vancouver-canada-spring-hopes-got-crushed/

Update on the Worsening Housing Bust in Vancouver, Canada: Spring Hopes Got Crushed

by Wolf Richter • Jul 8, 2019 • 60 Comments • Email to a friend

But it’s curing a housing crisis where middle-class households are priced out of a market, inflated by rampant international speculation and large-scale money laundering, says BC’s Finance Minister.

In the City of Vancouver, BC, Canada, condo sales in June plunged 28% from the already weak June last year to just 343 units. Inventory for sale jumped 32%. Prices – however you slice them – follow volume and supply: The median price fell 10% to C$656,000. The average price-per-square-foot fell 10% to C$933. And the MLS Home Price Index for condos, which calculates a “benchmark price” based on a “typical” condo, fell 10% to C$733,300. This took the MLS HPI below the level of June 2017 (red marks added):

Canada-Vancouver-Saretsky-Condo-HPI-2019

In Greater Vancouver, condo sales – the largest segment in the market ahead of detached houses and town houses – plunged 24% from June last year to just 976 units, the lowest number of sales since 2002.

“This is particularly concerning, given this doesn’t account for the increase in population growth and new condo stock during that time period, says Vancouver Realtor Steve Saretsky, in his June report on the Vancouver housing market.

Inventory of condos for sale in Greater Vancouver rose 48% from June last year to 5,887 units, for over six months’ supply. The median price fell 7.4% year-over-year to C$565,000. The MLS Home Price Index for condos, fell 8.9% to $C654,700.

And it gets a lot worse: detached houses.

In the City of Vancouver, sales plunged 16% to 151 houses. Inventory ticked down to 1,614 houses, as dispirited sellers pulled their houses from the market, leaving the market with about 11 months supply.

Prices inevitably follow volume and supply: The median price dropped 12% year-over-year to C$1.78 million. The average price fell 14% year-over-year and has now plunged 28% from the twin peaks in April 2016 and in October 2017 (each at $3.08 million), representing a decline of C$876,000. This is starting to be real money.

The MLS HPI for detached houses in the City of Vancouver has dropped 17% from the peak in July 2017, to C$2.025 million, the lowest “benchmark” price since March 2016:

Canada-Vancouver-Saretsky-Houses-HPI-201

In Greater Vancouver, detached houses, the second largest segment behind condos, is confronted with a market where buyers and sellers are too far apart to make deals. Sales in June plunged 61% from the peak in 2015, to just 761 units, the fewest transactions in the data going back to 1991 (when there had been 1,931 sales). Inventory for sale in Greater Vancouver rose to 7,025 houses.

The median house price in Greater Vancouver fell 9.4% year-over-year to C$1.284 million. The average price fell 14% to C$1.51 million.

“Buyers remain very cautious, and low-ball offers have become commonplace,” said Saretsky, who is also the author behind Vancity Condo Guide. He added: “When priced right, there is still adequate demand willing to provide liquidity.”

“Priced right” – that’s what the market is currently trying to figure out. And sellers are grappling with what that price means for them.

Townhouses galore, suddenly.

Townhouses confront a similar fate. In Greater Vancouver, sales in June fell 8% year-over-year to 341 units, as inventory for sale jumped 42% to 2,017 units. And the median price fell 10% to C$735,000.

In the City of Vancouver, the median price of townhouses fell 13% to C$955,000. And the “benchmark” price of the MLS HPI for townhouses, at C$1.024 million, is now down 10% from the peak in April 2018:

Canada-Vancouver-Saretsky-Townhouses-HPI

“Prior to the start of the year, many market watchers and industry pundits alike rightfully noted the importance of the spring market, suggesting it would dictate what to expect for the year ahead,” said Saretsky. “After a sluggish finish to 2018 and an equally weak start to 2019, there were hopes the historically resilient Vancouver housing market could shrug it off. However, month after month that proved not to be the case.”

Now come the fruits of the building boom…

After years of a blistering building boom, a record number of new housing units are or will be coming on the market in Greater Vancouver. Saretsky, citing data from the Canada Mortgage and Housing Corporation (an entity of the Canadian government), points out that an all-time record of 43,000 units are under construction (red line, right scale) and an additional 23,000 units have been completed (blue line, left scale) over the past 12 months:

Canada-Vancouver-Saretsky-Housing-constr

But it’s working…

Carole James, British Columbia’s Minister of Finance and Deputy Premier, expressed her approval with these developments, as a cure to the housing crisis in Vancouver, where local households with middle-class incomes are still priced out of the market that has been inflated by rampant international speculation and large amounts of money laundering, into one of the world’s craziest housing bubbles that is now, apparently satisfactorily, deflating.

She tweeted: “Through measures like the Speculation and Vacancy Tax and our world-leading work to end hidden ownership, we’re tackling the housing crisis and money laundering head-on to build a more sustainable economy that works for everyone.”

And she tweeted: “We’re leading the country in our work to ensure that housing is used for people, rather than a haven for speculation or worse, money laundering. I’ll continue to watch the housing trends closely but am cautiously optimistic that the housing market is returning to balance.”

And she tweeted: “After years of skyrocketing prices we’re finally starting to see more balance in the housing market. We’re seeing moderation in the cost of condos, townhomes and detached homes, while housing supply is at a five-year high.”

Let her rip – that’s the message. And kudos. It’s not common that governments express support for the deflation of these kinds of destructive housing bubbles. What we’re used to seeing instead are desperate governments calling for an immediate reflation and bailout, whatever the real costs to society may be.

 

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