10 Feb 13 charts to help you make sense of Canadian real estate craziness in 2017
Thankfully, there are charts. Economists with the country’s biggest financial institutions feed the real estate obsessed with innumerable charts presenting complex data in a straightforward way.
Here are 13 interesting examples BuzzBuzzNews has come across over the past year.
1. How downtown Toronto and Vancouver condo prices stack up globally
What’s going on here? National Bank gauges affordability by expressing the average cost of a 90-square-metre condo as a multiple of average family incomes in major markets worldwide.
The takeaway: “A comparison of price-to-income multiples of comparable condos in major city centres worldwide shows these two markets [are] still relatively affordable,” write National Bank economists Matthieu Arseneau and Kyle Dahms.
2. How much of Canadians earnings are eaten up by mortgage payments
What’s going on here? Looking at affordability another way, Morguard REIT displays what share of a typical Canadian’s income has gone towards servicing homeownership costs over the years.
The takeaway: Borrowers may not rejoice when they make their monthly mortgage payments, but just look at how much debt-saddled homeowners shelled out every month at the onset of the ‘80s (more than half the typical income, thanks to sky-high interest rates).
3. The case for foreign investment moving to Toronto (and Victoria)
What’s going on here? The vertical black line denotes when the BC government imposed its Metro Vancouver land transfer tax on foreign buyers, while the colourful lines represent home price changes in Toronto, Vancouver and Victoria.
The takeaway: Home prices continue to fall in Vancouver following the levy while they spark in Toronto. That lends credence to the theory that foreign homebuyers are turning to Ontario’s capital city.
“In case there was any doubt what force is at play, note that Victoria has tracked closer to Toronto’s behaviour than Vancouver’s,” adds BMO Chief Economist Douglas Porter.
4. A history of Toronto real estate peaks and crashes
What’s going on here? On an unadjusted basis, veteran realtor Marisha Robinsky of Bosley Real Estate expresses annual GTA price gains as a percentage dating back to 1953.
The takeaway: We’ve been here before. And hey, by at least one measure, Toronto’s current housing boom pales in comparison to some previous peaks.
5. One of these booms is not like the others (at least not yet)
What’s going on here? Bosley also adjusted average annual home prices for the GTA over the same period.
The takeaway? A GTA home could be had for $150,000 (in today’s dollars) in the ‘50s, which is likely to rile house hunters today.
6. Canada’s housing market hasn’t been this tight since before the Great Recession
What’s going on here? The sales-to-new listings ratio for Canada. That’s home sales divided by new listings in a month, expressed as a percentage. A ratio of 100 per cent would suggest homes are selling at a rate as fast as new listings are appearing.
The takeaway? “When the ratio approaches, or is above 0.60 [per cent], the market favours sellers and prices typically rise rapidly,” write RBC economists Craig Wright and Robert Hogue. The nationwide ratio was 0.63 per cent to close out 2016.
7. So this is why bidding wars break out over detached homes in Toronto…
What’s going on here? Not much, so far as single-family home construction goes. There’s been a sharp increase in the number of condos builders have been wrapping up in Toronto, but they haven’t added much housing stock by way of desirable detached homes.
The takeaway: “The big story remains below the surface, where single-detached completions hit the lowest level in 36 years in 2015 — and that’s before adjusting for population size,” explains BMO Senior Economist Robert Kavcic. “Cue bidding wars,” he adds.
8. Demographic demand explained
What’s going on here? Unlike in many European nations, the youthful 20-44 demographic is growing in Canada.
The takeaway: “The underlying force for housing demand is household formation. If your population aged 20-44 is growing, you have it. If it’s not, home price inflation is not sustainable,” argues Stefane Marion, National Bank’s chief economist. Simply, that age bracket is when people get hitched, buy homes, and start families.
9. The “spillover” effect
What’s going on here? Canada Mortgage and Housing traces home prices in the GTA as well as satellite markets including Guelph and Hamilton.
The takeaway: When home prices go up in a major Canadian city, nearby real estate markets feel the heat.
“Our evidence indicates that increasing single-family home prices in the GTA are motivating buyers to purchase more affordable homes in nearby centres,” says Jean Sébastien Michel, CMHC’s principal of market analysis.
10. Foreign money floods Canadian real estate?
What’s going on here? TD Bank charts how much money non-residents are holding in Canadian banks alongside the total number of dollars spent on Toronto and Vancouver homes.
The takeaway: “Housing has basically spiked just as much as you’ve seen foreign inflows of cash into the economy” increase, says Diana Petramala, TD’s real estate economist.
It’s a “good indicator” that lots of foreign money is pouring into home purchases in some of Canada’s most active housing markets.
11. Or, at the very least, Canadian debt isn’t to blame
What’s going on here? Canadian home prices (blue) have soared at a time when household debt (red) has not, breaking from historical norms that see the two generally track closely in line with each other.
The takeaway: “Something besides domestic borrowing has clearly fanned the flames,” notes BMO’s Porter. “We will simply note the anecdotal evidence that many foreign buyers do not borrow to buy.”
12. How long would it take for Canada’s resale housing supply to reach zero?
What’s going on here? RBC expresses the number of homes on the market across Canada in terms of how quickly they would sell out at the current pace of sales — supposing no new listings appeared.
The takeaway: “The slowdown in listings amid still-strong (albeit easing) resales reduced the number of months’ inventory in Canada to the lowest level (4.5) in more than six years in the early-fall before rising marginally to end 2016 at 4.6,” say RBC economists Craig Wright and Robert Hogue.
13. Home sales versus population growth in Toronto and Vancouver
What’s going on here? The ratio of sales to population for Vancouver (blue) and Toronto (red).
The takeaway? “Over the long run, population should be the main driver of existing home sales,” Petramala, the TD economist, tells BuzzBuzzNews. “The [rising Toronto] ratio is a signal that sales are rising faster than population — meaning the rise in sales might be driven by something other than demographics,” she adds. Maybe foreign buyers