Danielle Yeates

Canadian Housing: And Then There Were 2?

Canadian home sales held steady on a seasonally-adjusted basis in November, leaving activity up a modest 2.7% in the past year. While sales are still running comfortably above their 10-year average, activity has levelled off since peaking in August. With sales running at around 56% of new listings, and the months’ supply of homes for sale a very-normal 5.8, the national picture remains balanced. Prices continue to push higher, but all signs suggest that momentum has levelled off with the average transaction price up 5.7% y/y, and the more representative MLS HPI up 5.2% y/y—price growth isn’t exactly cooling yet, but it’s not accelerating anymore either. The familiar story about price growth largely being a 3-city show still rings true, though that list could be trimmed to 2 in short order (more on that below). Scanning across 26 major cities, fully 18 saw average prices up by less than the national average, with the median tucked comfortably at 3.5%. Here are some notable city trends: 

The slide in oil prices is going to take some, if not all, of the steam out of Calgary and Edmonton—and it may be doing so already. Sales in Calgary grew a tame 5.5% y/y in November, while new listings jumped 15% y/y. Early-December results from the city are more glaring, with sales flat and new listings popping more than 35% y/y. True, December is a slow month with a small sample, but that, combined with November’s result, is a decent hint that Calgary’s market could be rolling over. As Alberta-wide economic growth slows below the national average next year, inward migration will likely weaken as well, and flows from other provinces have been adding roughly a full percentage point to population growth in recent years.

Regina continues to weaken, with benchmark prices down 3.4% y/y. While sales are still healthy, the market remains flooded with supply—the sales-to-new listings ratio is at the low end of the historical range, while the months’ supply across Saskatchewan has popped above 7.

Vancouver prices continue to rise at a 5% y/y-plus pace (MLS HPI). Market balance remains near the tightest since mid-2009, with the sales-to-new listings ratio topping 58% in November, up almost 8 ticks from a year ago (the biggest gain in the country). Detached home prices are far outpacing those for condos.

Toronto benchmark prices were up 7.7% y/y in November, with detached homes in the city arguably the strongest sub-market in Canada, now that Calgary is poised to slow. Single-family homes are up almost 9% y/y, or twice the rate of condos, with lack of quality supply clearly an issue in the face of strong demand.

East of Toronto, half of the 10 reporting regions are seeing average prices below year-ago levels amid challenging demographics and very elevated supply. Note that Quebec, New Brunswick, Nova Scotia and Newfoundland & Labrador each have more than 10 months’ worth of supply on the market. Quebec is showing some sign of improvement, but market balance remains unfavourable.

The Bottom Line: Canada’s housing market continues to look balanced on a national basis, with strong price growth still coming from 3 select cities—and suffice it so say that Calgary can be soon crossed off that list. That leaves Vancouver and Toronto, where most of the gains are being fanned by lack of supply in the detached market.

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