Harbourwalk condos.The prospect of Canadian housing market. In this report, TD Bank of Canada asked and answered questions about the trend of the Canadian real estate market.Please Visit: Harbourwalk condos to Get Your VVIP Registration Today!
It mainly analyzes the recent market conditions and predicts the future policies of various regions of Canada. Point out the factors that contribute to smooth fluctuations, as well as some inevitable risk points.
List of questions and answers.
Question1: as borrowing costs soar, the Canadian real estate market is weakening. How to observe the depth of the influence?
Question 2: how long is the depth and duration of the correction?
Question 3: why “recalibrate” instead of worse?
Question 4: what is your long-term view of the market?
Question 5: what is the impact of housing on the overall economy?
Question 6: what are the risks or special considerations for your prospects?
Question1: as borrowing costs soar, the Canadian real estate market is weakening. How to observe the depth of the influence?
In the second quarter of this year, Canadian home sales fell 20% month-on-month, and average house prices fell 9%. And prices fell again in July. Particularly noteworthy is (figure 1):
Ontario and BC provinces saw the biggest declines in house prices, where the housing market also shrank rapidly during the outbreak.
House prices in Alberta also fell rapidly, although overall sales did not fluctuate much. So compared with BC and Ontario, the situation is slightly better. In addition destocking capacity in Quebec also decreased significantly during the outbreak. The slowdown in price growth will also continue for a long time.
Of course, there are also provinces that perform well. House prices are basically stable in Prairie provinces and the Atlantic region. The former has benefited from policy adjustments, while the latter has been strongly supported by population growth.
These different developments reflect the dispersion of buyers during the outbreak. Online office work and the desire for more living space have prompted buyers to avoid the centres of big cities and go to the suburbs and even the outer suburbs. This shift has had a strong impact on price growth in the housing markets in BC and Ontario, where deflation is now faster than in other regions.
It is not normal for this to happen at the same time in several major provinces. In BC province, for example, this pattern of over-adjustment in markets other than Dawen has existed in previous real estate downturns. However, this is not usually the case in Ontario, where other less populated areas are not much different from the Greater Toronto area.
It can also be seen that since February this year, the price of independent housing has fallen by 7% (more than the average price fluctuation), while apartment prices have remained good. This reflects a sharp decline in the purchasing power of independent units during the outbreak. It is also similar to the market in 2017-2019, where a series of macro policies (Ontario’s Fair Housing Program, BMU20) and rising interest rates cooled the detached housing market as purchasing power declined, while apartment prices rose.
Unlike in 2017-2019, we believe that apartment prices will also fall in the coming months, but the magnitude (or duration) may be different from that of detached houses. Because the prices of apartments have also been falling in three of the past four months. In addition, higher borrowing costs and lower prices may affect investors’ psychological expectations, as these costs just offset high rental gains.
Question 2: what is the depth and duration of the impact of this round of adjustment?
From the first quarter of 2022 to the first quarter of 2023 (figure 2), average house prices in Canada are likely to fall by 20-25% from peak to trough, as sales are expected to fall by about 35% over the same period. Reflecting that their trading volumes will continue to decline (figure 3), more declines are expected in BC and Ontario, while Alberta, Quebec and the Atlantic are likely to contract relatively less. At the same time, we expect prices in Manitoba and Saskatchewan to remain good during this period.
We predict that the decline in house prices across the country will only partially pull back, reaching the 46% increase after the epidemic. As a result, our forecast can be more appropriately described as a “market realignment” rather than a more serious crash.
Please note that our projected trough in Canadian home sales fell just within the range of past real estate downturns and sales fell by 38% as a result of the global financial crisis. The decline we expect is unprecedented (at least since the late 1980s). However, there has also been an unprecedented growth during the outbreak.
As mentioned earlier, during the outbreak, demand for larger, more expensive housing soared (figure 4), which put more upward pressure on average house prices. Because according to the calculation, the average house price will be disproportionately affected by high-end (or low-end) transactions. Especially at this stage, because the valuations of high-end units, such as freestanding houses, are falling at a relatively rapid rate.
