July 21, 2010
Economic update
Want a home in Vancouver? Be prepared to spend two-thirds of a million dollars
ALEX CARRICK
Chief Economist, CanaData
There is a strong tie-in between consumer confidence and the housing market. Homeowners derive a large measure of their sense of financial worth from the value of the property they live in.
From this standpoint, Canadians have a huge advantage over our American cousins at this stage of the economic recovery.
Due to the sub-prime mortgage collapse and a tidal wave of foreclosures that extended into the prime category as well, U.S. home prices plummeted from early 2006 into 2009.
Nationally, the decline was 33% according to S&P/Case-Shiller. In Las Vegas, perhaps the worst-hit city, the drop was 50%. The recovery in prices so far has been minimal.
Few cities experienced much of a drop in home prices in Canada. The worst period for residential real estate in this country occurred in the first quarter of last year.
From the second quarter on, however, activity levels picked up dramatically. Resales set records or near records in late 2009 and early 2010.
Over the last couple of months, both the existing and new home markets have softened a little. Expectations of rate hikes, the HST introductions in B.C. and Ontario and tighter mortgage lending rules have played roles.
Nevertheless, the home market in Canada remains strong. This adds to the list of more positive economic news for Canada than for almost all other industrialized nations.
The indications of stronger residential markets in Canada are everywhere. On a year-over-year basis, new home prices are +2.9% nation-wide, according to Statistics Canada.
Existing home prices are +4.9% (June 2010 versus June 2009), according to the Canadian Real Estate Association (CREA).
The average existing-home resale price in Vancouver is now two-thirds of a million dollars. That seems like a staggering figure. Limited availability of land, desirable condominium projects downtown and an inflow of money from wealthy Far Eastern buyers account for much of the high price point.
Victoria at half a million dollars isn’t quite as expensive. But that’s still a cool chunk of change. Toronto in third place among major urban centers in Canada seems relatively inexpensive at $435,000.
To provide some context, the average price of an existing home in Vancouver is 50% higher than in Toronto. In Victoria, it is nearly 20% higher. All of Canada’s other large cities fall below Toronto in average resale price level.
Calgary ($415,000) is more expensive for housing than Edmonton ($335,000). The nation’s capital, Ottawa ($328,000), is a further small step down.
The major cities in la belle Province, Montreal ($307,000) and Quebec ($238,000), offer bargain accommodation. The Atlantic Region’s urban areas are still the most reasonably priced in the nation.
A good housing market provides a sound foundation on which much of the rest of the economy can depend. At a minimum, it enables labour to be more mobile and promotes consumer spending. Canada continues to be fortunate in its current vibrant housing sector.
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.
cData source: The Canadian Real Estate Association (CREA) (based on MLS® average sales prices in the month).
Chart: Reed Construction Data - CanaData.
*The St. John's NL figure is actually for all of Newfoundland and Labrador.
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.
