May 4, 2011
Residential real estate in Canada continues to attract buyers
Residential real estate markets in Canada continue, with a few exceptions, to perform well.
According to the Canadian Real Estate Association (CREA), the seasonally adjusted level of resale activity in this year’s first quarter was 4.5% higher than in the fourth quarter of last year.
Furthermore, Q1 2011’s sales volume was the highest in the past year.
The average resale price nation-wide in March 2011 was 8.9% higher than in it was during the same month of last year.
However, demand for high-priced homes in Vancouver distorted the figure.
If West Vancouver and Richmond were left out of the calculation, the year-over-year change in existing home prices in Canada would have been only about half as great, at +4.3%.
This highlights the fact Vancouver’s homes market is quite a different entity than anywhere else in the country.
The following are some interesting price comparisons from CREA’s latest report.
The price of an average existing home in first-place Vancouver in March was 59% higher than in second-place Victoria and 72% pricier than in third-place Toronto.
The average price of an existing home in Halifax is only one-third that of Vancouver. In Fredericton and Saint John, N.B., it is only one-fifth.
In the great competition for status in Alberta, the average resale price of a home in Calgary is 22% higher than in Edmonton.
The Web site version of this report includes a chart showing other comparisons relative to Toronto, which has been adopted as the benchmark, since it is the nation’s most populous urban area.
This also seems like a good time to present a recap of the new homes market. The 2010 full-year starts figures are now available from Canada Mortgage and Housing Corporation.
It’s particularly interesting to note how important the major cities are in their home provinces with respect to housing starts.
For example, in full-year 2010, housing starts in Montreal were 43% of the provincial total. Quebec City was 13%.
Toronto’s housing starts were 48% of Ontario’s. Ottawa recorded the second highest number of starts in the province, at 15%.
Home groundbreakings in Winnipeg made up 55% of Manitoba’s total in 2010.
Edmonton was 37% of Alberta; Calgary was 34%. Those two cities combined made up more than two-thirds (71%) of the Alberta figure.
Vancouver was 58% of the B.C. total, with Victoria at 8%. Therefore, Vancouver and Victoria accounted for two-thirds of B.C.’s total housing starts.
In Saskatchewan, the “emerging” province in Canada, home starts in Saskatoon (2,381 units) were 1,000 higher than in Regina (1,347 units).
There is often a tie-in between home starts and labour markets in the major cities. Strong residential construction is indicative of a vital local economy that is drawing in workers who need accommodation.
At the same time, strong housing starts on their own offer considerable job opportunities.
The six largest cities in the country by population – Toronto, Montreal, Vancouver, Ottawa, Calgary and Edmonton – accounted for almost exactly half (49.9%) of total national housing starts in 2010.
The 33 cities in Canada accorded census metropolitan area (CMA) status contributed almost three-quarters (73%) of the nation’s total starts last year.
Before leaving this report, let’s return to prices for a moment. Buoyancy in new home prices, which were up 2.1% year over year in February 2011, was not quite as strong as for existing homes.
No matter how you look at it, however, residential real estate markets have been remarkably better in this country than south of the border. In the U.S., resale homes on average are selling for one-third less than prior to the recession.
Nor is relief likely to come quickly with respect to the record number of U.S. mortgage foreclosures.
The 50-state commission set up to review some questionable foreclosure practices adopted by major financial institutions has taken a dim view of forgiving principal as a means to solve the problem.
It is opting instead for reviews on an individual case basis, plus financial compensation for owners who have been unjustifiably forced out of their homes.
The better housing market in Canada has provided tremendous advantages in retaining and creating jobs, as well as in providing households with more confidence to carry on with normal spending patterns.
For more articles by Alex Carrick on the Canadian and U.S. economies, please see his market insights. Mr. Carrick also has an economics blog. His lifestyle blog is at www.alexcarrick.com
Data source: Statistics Canada (New Housing Price Index - NHPI).
Chart: Reed Construction Data - CanaData.
Three-month moving averages of month-to-month per cent changes, placed in latest period.
Data source: The Canadian Real Estate Association (CREA) (based on MLS average sales prices in the month).
Chart: Reed Construction Data - CanaData.
*Ratio = average selling price in each other city / average selling price in Toronto.
Data source: The Canadian Real Estate Association (CREA) (based on MLS average sales prices in the month).
Chart: Reed Construction Data - CanaData.
