This Week’s Top Stories: Canadian Real Estate Saw $150 Billion In Excess Sales and Lenders Warned About Prices
Time for your weekly cheat sheet on this week’s top stories.
Canadian real estate
Canada relies on properties with “excess” home sales reaching 6% of GDP: BMO
Canada went so far in home sales that excess home sales now represent 6% of its GDP. Existing home sales reached $ 500 billion in annualized sales in October. BMO estimates that there is a demand overhang of $ 150 billion, which is driving prices up. It should stop as soon as the central bank wants it to stop, the Big Six bank said.
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Ontario properties are the most overvalued in Canada, slow growth expected: Moody’s
Canadian home prices are generally overpriced, according to a ratings giant. Moody’s latest models show urban cities are overrated by 22.6%. After the massive increase this year, they don’t expect an encore next year. Average annual growth of just 1.3% is forecast for the next two years. Slow growing provinces (like Alberta) are likely to buck this trend.
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Canadians invest less money in real estate and more in US stocks and bonds
Canadians invest more in foreign stocks and less in real estate. Foreign stocks pumped a net gain of $ 17.2 billion in September, 33% more than the same month last year. At the same time, the dollar value of existing homes reached $ 34.9 billion, a decrease of 5.9% from the previous year. It’s worth watching these data points over the next several months. Investors are major home buyers and are driving demand. When looking for returns in other segments, it can mean fewer dollars are driving home prices.
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New property price growth in Canada is slowing after hitting its highest level since 1989
New home price growth in Canada is slowing after hitting a 3-year high for annual growth. New home prices rose 0.9% in October and 11.5% higher than last year. It’s one of the fastest annual growth rates in history, but lower than the most recent high in August. Historically, growth has not spent much time at this level and a period of low to negative growth follows. If the trend cools, it could be followed by slow growth. This is a trend that the industry largely expects.
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In Canada, house prices for a “typical” home soared to as high as $ 78,000 just last month
Canadian home prices soar as a sudden surge in demand has been met with a complete shortage of inventory. The reference price across Canada hit $ 762,500 in October, up 2.34% ($ 17,400) from the previous month. This is the national number, with house prices increasing as much as 5.4% ($ 73,100) in a month in some cities. Somehow the Bank of Canada (BoC) believes this is an environment that needs more credit incentives.
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Canadian inflation hit an 18-year high of 4.7% but is much higher in some provinces
Canadian inflation hit nearly two decades high and some provinces are even worse. Annual consumer price index (CPI) growth reached 4.7% in October, compared with 4.4% in the previous month. It was the highest since 2003, but still lower than most of the provinces. This is particularly true of the maritime sector, where annual growth in some provinces is now over 6%.
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Canadian immigration data shows the largest month in at least a century
Canadian immigration may have been sluggish, but it’s back with a new record. There were 45,040 permanent residents in September, 19% more than the previous month. It was the largest single month of arrivals in over 100 years of data. However, this cannot lead to an immediate demand for housing. Canada’s permanent residents come from both outside and inside the country.
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Canadian new build projects are now aborting as inflation forces builders to take a break
Canadian housing starts plummet as inflation forces home builders to pause. The number of housing starts fell to 236,554 housing starts in October, a decrease of 5.3% compared to the previous month. This number has fallen by 29% compared to the high reached in March during the wood and material frenzy. Technically speaking, a decrease of more than 20% means a “crash” in the number of starts.
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Toronto real estate
It is official. Canada’s largest real estate committee is building a for-profit company
Canada’s largest real estate committee released more details about its for-profit company. Toronto Regional Real Estate Board (TRREB) creates PropTx Innovations Inc. It will be a for-profit entity wholly owned by the board of directors. By forming the company, the nonprofit board hopes to capitalize on its proprietary data.
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US real estate
New home in the US starts with a lower trend and allows entry into the correction area
US starts for new homes and permits have trended lower in recent years. Housing starts fell to a seasonally adjusted annual rate (SAAR) of 1.52 million in October, a 8.3% decrease from the most recent high in December 2020. Those numbers are trending down, not because of a lack of demand, but because of inflation. Shortages of materials and unstable costs mean that some builders pause on new projects.
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