Friday, August 01, 2014

Canadian Real Estate - A Crack in the Tree

by Tom Bradley, Steadyhand Investment Funds

The Full Article

“It’s like if the tree in the backyard has a crack in it, you worry it’s vulnerable to a storm. But if no storm happens, it goes on and on, and maybe eventually strengthens through growth. If the right storm comes along and knocks it onto your neighbour’s house you’ve got a problem.”

This analogy for the Canadian residential real estate market is from our Bank Governor, Stephen Poloz. It prompted me to pull together a number of observations that were building up in my real estate file. In the attached piece (it’s too long for a blog), I point out that:
  • Being too early is tantamount to being wrong.
  • Real estate is a cyclical asset, cycles have a symmetry to them and therefore, extremely good cycles don’t end with a little pause or modest slowdown.
  • There’s a strong consensus that interest rates will stay low and house prices will stay high.
  • Fundamental measures are on balance negative. The most important ones are extremely negative.
  • Foreign buying, inter-generational transfer and the loonie are wild cards in the analysis.
  • Canadians are focused on the ‘Income Statement’ impact of buying a home (i.e. carrying cost), but are overlooking the ‘balance sheet’ impact.
  • We’ve been in an ideal environment for rising real estate prices. It’s been a ‘virtuous circle’. If a few of the variables turn, a downward spiral is equally possible.
  • A few other items that will make real estate bulls mad.
In true Steadyhand fashion, I’m not suggesting you make a big asset shift by selling your home and moving the family into a rental. But I am suggesting that it’s time for added caution. If possible, you should to be subtracting from this asset class, not adding.

Copyright © Steadyhand Investment Funds

Sunday, June 15, 2014

April 2014 Residential Construction Activity - Vancouver CMA

Below are CMHC starts, completions and under construction for Vancouver CMA to April 2014. Starts and completions are displayed as 12 month sums (included May preliminary housing starts):
No signs of a downturn...


Thursday, June 12, 2014

Teranet House Price Index - May 2014

HOME PRICES UP 0.8% IN MAY

In May the Teranet-National Bank National Composite House Price Index™ was up 0.8% from the previous month. This increase, though substantial in itself, was the fifth smallest for May in the 16 years covered by the index. The countrywide composite index rose to an all-time high, but only three of the 11 metropolitan markets surveyed did the same. Prices were up from the previous month in seven markets and by more than the national average in five. The 3.1% monthly gain in Halifax was the largest in the history of that market. Prices rose 2.0% in Hamilton, 1.6% in Quebec City, 1.3% in Toronto, 1.1% in Calgary, 0.6% in Edmonton and 0.5% in Montreal. Calgary's advance was the fourth in a row exceeding 1%, taking prices to a new high. New records were also reached in Hamilton and Toronto. Prices were unchanged from the month before in Ottawa-Gatineau and Vancouver. The reading for Vancouver ended 12 consecutive months of rising prices. Prices were down from the previous month in Victoria (−0.1%) and Winnipeg (−0.3%).

Teranet – National Bank National Composite House Price Index™

Contact Us

For general enquiries:

info@housepriceindex.ca

For licenses covering all index-linked products, please contact:

Simon Côté
514 879-5379
Since in May 2013 the monthly rise of the composite index was 1.1%, this May's 0.8% rise meant that 12 month home price inflation decelerated 0.3 percentage points to 4.6%, where it was in March. For the third month in a row, prices were down from a year earlier in all four markets east of Toronto: Quebec City (−1.6%), Ottawa-Gatineau (−1.4%), Montreal (−1.2%) and Halifax (−0.4%). In Victoria prices were flat from a year earlier. The 12-month rise trailed the countrywide average in Winnipeg (+1.0%) and Edmonton (+2.6%) and led it in Hamilton (+5.9%), Toronto (+6.0%), Vancouver (+8.2%) and Calgary (+8.7%). The softness of prices east of Toronto is consistent with the excess supply prevailing in the resale markets of these metropolitan areas. That being said, market conditions are generally balanced elsewhere, and are even tight in Calgary.

Teranet – National Bank House Price Index™



The historical data of the Teranet – National Bank House Price Index™ is available at www.housepriceindex.ca.
Metropolitan areaIndex level
May
% change m/m% change y/y
Calgary181.291.1 %8.7 %
Edmonton175.850.6 %2.6 %
Halifax142.073.1 %-0.4 %
Hamilton148.802.0 %5.9 %
Montreal149.160.5 %-1.2 %
Ottawa139.500.0 %-1.4 %
Quebec175.541.6 %-1.6 %
Toronto157.161.3 %6.0 %
Vancouver180.470.0 %8.2 %
Victoria133.79-0.1 %0.0 %
Winnipeg195.51-0.3 %1.0 %
National Composite 6162.160.8 %5.1 %
National Composite 11162.500.8 %4.6 %
The Teranet–National Bank House Price Index™ is estimated by tracking observed or registered home prices over time using data collected from public land registries. All dwellings that have been sold at least twice are considered in the calculation of the index. This is known as the repeat sales method; a complete description of the method is given atwww.housepriceindex.ca

The Teranet–National Bank House Price Index™ is an independently developed representation of average home price changes in six metropolitan areas: Ottawa, Toronto, Calgary, Vancouver, Montreal and Halifax. The national composite index is the weighted average of the six metropolitan areas. The weights are based on aggregate value of dwellings as retrieved from the 2006 Statistics Canada Census. According to that census1, the aggregate value of occupied dwellings in the metropolitan areas covered by the indices was $1.168 trillion, or 53% of the Canadian aggregate value of $2.207 trillion.

All indices have a base value of 100 in June 2005. For example, an index value of 130 means that home prices have increased 30% since June 2005.
By:
Marc Pinsonneault
Senior Economist
Economics and Strategy Group
National Bank of Canada
Teranet - National Bank House Price Index™ thanks the author for their special collaboration on this report.
1 Value of Dwelling for the Owner-occupied Non-farm, Non-reserve Private Dwellings of Canada.

Wednesday, May 14, 2014

Teranet House Price Index - April 2014

HOME PRICES UP 0.5% IN APRIL

In April the Teranet-National Bank National Composite House Price Index™ was up 0.5% from the previous month, following a flat March. Though the gain might appear robust, it must be said that apart from the recession in 2009, the composite index always advanced in April, the average monthly increase having been 0.9%. Last month's advance is indeed the third weakest for April outside a recession since 1999. Though the countrywide composite index rose to an all-time high, only four of the 11 metropolitan markets surveyed did the same. Prices were up from the previous month in nine markets. Calgary's 1.5% advance was the third in a row exceeding 1%, taking that market to a new high. Montreal's monthly gain of 0.8% was far from making up the ground lost in March. Prices in Hamilton, Halifax and Ottawa-Gatineau were up 0.7% on the month. The rise in the national capital region ended a run of seven monthly retreats. The rise in Halifax left its index still below the January reading. The monthly gain was 0.6% in Edmonton, 0.5% in Vancouver (the only city whose prices have risen for 12 consecutive months, also to a new high), 0.4% in Winnipeg and 0.3% in Toronto. These last two markets reached new highs although their advances trailed the countrywide average. Two markets were down from the previous month, Quebec City (−0.5%) and Victoria (−1.0%).

Teranet – National Bank National Composite House Price Index™

Contact Us

For general enquiries:

info@housepriceindex.ca

For licenses covering all index-linked products, please contact:

Simon Côté
514 879-5379
Since in April 2013 the monthly rise of the composite index was the smallest on record (+0.2%), the rather modest advance of April 2014 resulted in an acceleration of 12 month home price inflation to 4.9% from 4.6%. However, for the first time since October 2010, prices were down from a year earlier in five of the 11 markets, including all four of those east of Toronto: Halifax (−3.5%), Quebec City (−2.4%) and Montreal and Ottawa-Gatineau (−0.4%). The fifth market with 12-month deflation was Victoria (−0.7%). In striking contrast were 12-month gains of 10.0% in Calgary and 9.0% in Vancouver. Toronto (+5.8%) and Hamilton (+5.3%) also pulled the cross-country average higher. Trailing the average were Edmonton (+4.0%) and Winnipeg (+2.5%). The softness of prices east of Toronto is consistent with the excess supply prevailing in the resale markets of these metropolitan areas.

Teranet – National Bank House Price Index™



The historical data of the Teranet – National Bank House Price Index™ is available at www.housepriceindex.ca.
Metropolitan areaIndex level
April
% change m/m% change y/y
Calgary179.391.5 %10.0 %
Edmonton174.880.6 %4.0 %
Halifax137.750.7 %-3.5 %
Hamilton145.920.7 %5.3 %
Montreal148.370.8 %-0.4 %
Ottawa139.490.7 %-0.4 %
Quebec172.74-0.5 %-2.4 %
Toronto155.150.3 %5.8 %
Vancouver180.520.5 %9.0 %
Victoria133.88-1.0 %-0.7 %
Winnipeg196.000.4 %2.5 %
National Composite 6160.940.6 %5.5 %
National Composite 11161.280.5 %4.9 %
The Teranet–National Bank House Price Index™ is estimated by tracking observed or registered home prices over time using data collected from public land registries. All dwellings that have been sold at least twice are considered in the calculation of the index. This is known as the repeat sales method; a complete description of the method is given atwww.housepriceindex.ca

The Teranet–National Bank House Price Index™ is an independently developed representation of average home price changes in six metropolitan areas: Ottawa, Toronto, Calgary, Vancouver, Montreal and Halifax. The national composite index is the weighted average of the six metropolitan areas. The weights are based on aggregate value of dwellings as retrieved from the 2006 Statistics Canada Census. According to that census1, the aggregate value of occupied dwellings in the metropolitan areas covered by the indices was $1.168 trillion, or 53% of the Canadian aggregate value of $2.207 trillion.

All indices have a base value of 100 in June 2005. For example, an index value of 130 means that home prices have increased 30% since June 2005.
By:
Marc Pinsonneault
Senior Economist
Economics and Strategy Group
National Bank of Canada

Thursday, April 03, 2014

Greater Vancouver Market Snapshot March 2014

Below are updated sales, inventory, months of inventory, and sell-newlist ratio graphs for Greater Vancouver to March 2014. (See REBGV news releases.) (Click on images to enlarge.)

My estimates for March were for inventory of 14565 (actual 14472) and sales of 3127 (actual 2641) based on estimating average changes from February of years 2005-2013. Using the same technique estimates inventory and sales for April of 15620 and 2785 respectively (MOI=5.6).