Canada’s housing market: is it a cooling? Is it a crash?
By Erica Alini - Wednesday, October 31, 2012 - 0 Comments
Last Friday, rating agency Moody’s announced that almost all of Canada’s biggest banks might be in for a credit downgrade, citing “concerns about high consumer debt levels and elevated housing prices.” It was just the latest warning that, after soaring for 14 years, Canada’s housing market might be finally headed back to Earth.
Now, virtually everyone—from the Bank of Canada and the Finance Department through Canada’s banks to the International Monetary Fund and independent analysts—agrees that housing is losing steam and Canadian wallets are overstretched.
But is Canada’s housing market headed for a gracious landing or a face-forward crash? When it comes to predicting how rough a ride it will be, opinions vary widely.
To help Maclean’s readers make up their minds, we’ve compiled a review of prominent arguments supporting bullish and bearish positions on four key questions about the future of Canada’s real estate and what it all means:
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Canadian housing: There’s an obvious oversupply problem in Vancouver, Toronto and Montreal
By Ben Rabidoux - Tuesday, September 11, 2012 at 1:39 PM - 0 Comments
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August resale and housing starts figures are now out for all three of Canada’s biggest cities, and it’s not a pretty picture.
Vancouver
When the August resale data for Vancouver came out last week, the headline news was that sales had fallen to their second lowest level for the month since 1998. Sales were 30 per cent below what they were in August of last year and 40 per cent lower than the August average of the past 10 years.
But the numbers are even worse than the headline reveals. On paper, August 2008 holds the record as the weakest month of the past 15 years. However, it had two fewer week days than August 2012. If calendar differences are taken into account, last month represents the lowest sales volume of any August in 15 years.
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The under-the-radar changes that may soon deflate (or pop) the housing bubble
By Ben Rabidoux - Monday, April 23, 2012 at 11:46 AM - 0 Comments
Ben Rabidoux is is an analyst at M Hanson Advisors, a market research firm, where he focuses on Canadian mortgage and credit trends and their implications for the broader economy. He blogs regularly about the housing market at The Economic Analyst.
The next decade for real estate in Canada will be fundamentally different than the last. Our aging population, a mismatch between where our prices are and where they should be based on our economic performance, and rising interest rates are all reasons for this. However, the greatest difference will be in the availability of credit going forward, and those who try to explain real estate prices in Canada without acknowledging the role of easy, accessible credit over the past ten years or so have completely missed the boat.
Despite three rounds of mortgage rule changes since 2008 that largely corrected previous mistakes, we’ve seen a decade of extraordinarily loose lending in Canada. But the era of cheap credit may soon end–and possibly quite abruptly. News has come from Canada Mortgage and Housing Corporation and the Office of the Superintendent of Financial Institutions Canada, Canada’s chief financial regulator, that major changes are on the way, and it’s hard to understate how significant they may prove to be.
Here’s what those changes look like, in a nutshell:
1) CMHC will drastically draw down on mortgage insurance.
CMHC insures nearly 50 per cent of the whopping $1.1 trillion in residential mortgage credit currently outstanding in Canada. The growth in CMHC insurance has been shocking (more on that here)–just look at these charts:
