National Housing Market – The problem with measuring a whole that is comprised of separate parts is that is difficult to comprehensively reflect everything.
And so it is with the Canadian Housing Market. Recent reports suggest that price appreciation, according to national figures, has been rapid.
Of course, this national value has gotten most of the momentum for the upward trend from only a handful of regions – namely Vancouver and Toronto – that have seen a surge in prices.
CIBC World Markets Inc. warns in a report that a measurement of the whole, without special attention to different segments and regions, may be in itself flawed.
The report says, “The Canadian housing market is becoming highly segmented and multi-dimensional which is making traditional measures, like average prices, increasingly irrelevant in gauging the health and state of the sector.”
“Glancing at popular metrics such as the price-to-income ratio or the price-to-rent ratio, it is tempting to conclude that the housing market is already in clear bubble territory and a huge crash is inevitable,” writes Benjamin Tal, Deputy Chief Economist at CIBC, in his latest Consumer Watch Canada report.
“Tempting, but probably wrong. When it comes to the Canadian real estate market at this stage of the cycle, any statement based on average numbers can be hugely misleading. The truth is buried in the details—and there the picture is still not pretty, but much less alarming.”
The proof for this too, is in the numbers. Nationally, year-over-year, home prices rose by 8.6 %. Take Vancouver out, it falls to 5.6 %. Take both Vancouver and Toronto out, annual price increase is only 3.7%.
It isn’t just the skewing of prices, either. Tal says that it is also about other gaps- like the height of the high end of the property market in Vancouver, for instance. “What makes Vancouver abnormal is the high end of its property market. And in this context many, including Bank of Canada Governor Mark Carney, point the finger at foreign—mainly Asian wealth—as the main driver here.”
How does national skewing of prices affect other local markets? It comes down to examining factors driving activity, and considering them in the grand scheme of things.
Halifax Realtor Larry Matthews, Hants Realty told Propertywire.ca, “In every region the real estate market is local and unique to local circumstances. The changes to mortgage availability have had an over all negative effect on many communities, as qualified buyers have become scarce. Those communities that are not impacted by immigration are starting to see listing inventories rise and some downward pressure on prices.”
“ I know in our area when appraising, it is getting harder to find comparable sales that support the cost of new construction. Along with immigration you have the migration from province to province. This migration increases demand for housing in places like Fort McMurray Alberta while it decreases demand for housing in places like Canso Nova Scotia.”
“Bottom line. Where there is demand for housing there are well paying jobs in construction and where there is no demand for housing those jobs aren’t as available… It is important for government to consider the impact of its decisions on all communities before basing those decisions on national figures which are unable to factor in all the variables.”