Canada’s Housing Market: Not Too Hot, Not Too Cold

“The Canadian housing market has seen some big ups and downs in recent years, making national sales activity so far this year look like something of a Goldilocks story by comparison,” affirmed CREA’s president Gary Morse, “not too hot, not too cold.”
The latest data released by the Canadian Real Estate Association (CREA) suggests that while housing prices have increased 8.6% over this time last year, the increase is still within a comfortable range, particularly when compared against the more volatile changes experienced in recent years. The increase seems to suggest that the still low Canadian mortgage rates overpowered the recent restrictions on mortgage rules and poor spring weather.
Making that figure even more reasonable is the fact that it’s primarily been driven by price increases in Vancouver and Toronto (removing the two cities from the equation results in a much more modest 3.7 % price increase). Vancouver is truly in a league of its own with house prices up 25.7% over May 2010. While there is a lack of hard data to prove it, the consensus is that foreign investors from China have been willing to make exorbitant valuations on higher-end properties in and around Vancouver and Richmond.
Toronto, on the other hand, has seen housing prices rise 8.7% over last year. While strong, it is considered well below bubble territory. In fact, the consensus is that housing demand is so strong in Toronto that supply is still catching up. While a supply overshoot is eventually possible, that certainly isn’t the case right now.