Who’s winning and who’s losing (big) in Canada’s housing markets

Location, location, location

A new Bank of Montreal report highlights the sudden shift in Canada’s regional housing markets, notably the “very weak” nature of those on the Prairies.

 As The Globe and Mail’s Tamsin McMahon has chronicled, the plunge in crude prices has put a damper on the markets in oil-sensitive regions like those in Alberta.

“While Canada’s housing market balance has turned slightly weaker overall, location has become increasingly important,” said senior economist Robert Kavcic of BMO Nesbitt Burns.

“Market balance on the Prairies is very weak (resource prices), and prices in most markets there have begun to slip alongside elevated supply and a drop in confidence,” he added.

“Ditto for Atlantic Canada, though poor demographics are playing a bigger role there (at least outside Newfoundland).”

Which, as Mr. Kavcic put it, means British Columba and Ontario have to “carry the weight.”

 Those markets found to be very weak, at 10, outnumber those in the other categories. There are three markets found to be weak, two that are very strong, one that is strong and six that are balanced.

Whether a market is strong, weak or balanced is based on current conditions against a 20-year average.

Here’s what he found, as of February:

• Vancouver’s market is balanced, with average prices on a three-month basis up 3.3 per cent from a year earlier, resales up 13.6 per cent and the average home price 11 times greater than the estimated median family income for 2015. Sales are 14.3 per cent above the 10-year average, again on a three-month basis.
• Using the same measurements, Victoria prices are up 0.4 per cent, and prices 14.4 per cent, and the price-family income ratio stands at 5.4 per cent in a balanced market. Sales are 3 per cent below the 10-year average.
• Calgary and Edmonton are, of course, taking a hit from the oil rout.
• Calgary prices are down 0.7 per cent, and sales are down 27 per cent, with a price-family income ratio at 4 in a very weak market. Sales are almost 18 per cent below the 10-year average.
• Regina, Saskatoon and Winnipeg also fall into the very weak category. As do Ottawa, Kingston, Ont., Halifax and the provinces of Prince Edward Island and Newfoundland and Labrador.
• Montreal, St. John and Kitchener-Waterloo, Ont., are deemed just weak.
• Then there are the “very strong” centres of St. Catharines and Windsor, Ont., and the Hamilton-Burlington as simply strong.
• Among those found to be balanced, besides Vancouver and Victoria, are Toronto and the Ontario centres of Sudbury and Thunder Bay.
• In Toronto, average prices are up 6.6 per cent and resales 8.6 per cent. Sales vs. the 10- year average are up 5.2 per cent, and the price-family income ratio is at 7.5.

“Note that Vancouver’s market balance is within rounding error of being classified as ‘strong,’ while Toronto’s balanced market reflects an extremely tight detached segment, offset by much more supply in the condo sector,” Mr. Kavcic said.

And just today, the Toronto Real Estate Board reported that resales in the first two weeks of this month climbed 11.8 per cent from a year earlier, with the average selling price up 10.6 per cent to $620,106.

 

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