In a Toronto Star Op-ed, business columnist David Olive makes the case that doomsayers are wrong about the state of Canada’s mortgage and housing markets – and, more particularly, why the dire predictions by pessimistic hand-wringers regarding the imminent collapse of Toronto’s real estate markets miss the mark.
Contrasting Canada’s mortgage and real estate markets the hard-pressed markets in the U.S., Mr. Olive writes that, “the new skittishness over housing values in Canada’s much healthier market arises from an abrupt slump in the Canadian market” – a slump in which the number of home sales dropped 25 per cent from their peaks earlier this year, “when Canada was experiencing more robust economic growth and job creation than in recent months.”
Making the argument that the drivers of Canadian markets are very different than drivers in the U.S., Mr. Olive cites recent conflicting analyses from the Conference Board of Canada and the Canadian Centre for Policy Alternatives (CCPA); the former forecasting “a slightly weaker but stable outlook for Canadian home values,” with the latter progressive think-tank cautioning that “homes now are overpriced in almost all major Canadian cities.”
“Canadian home sales eased downward by 25 per cent over the past seven months,” the Toronto Star columnist notes, while “U.S. home sales dropped yet another 25 per cent in July alone.” Additionally, while “average selling prices have slipped in each of the past three months, Mr. Oliver notes that current prices have only slipped to where they were at the same time last year” – “a soft landing” from the record highs we saw in May, particularly when compared with U.S. prices that have been falling in many markets since 2008.
Canadian markets have “been less volatile than selected cities in the U.S., Asia and Europe,” he writes, primarily because Canadian cities “suffered their own share of painful buying panics and inevitable busts from the 1970s to the early 1990s” – boom and bust cycles that “drained much of the speculative fervor [amongst both lenders and buyers] from Canadian property markets.”
Regarding markets in Toronto specifically, Mr. Olive points out that Canada’s largest city is “in the midst of a second population boom in four decades,” a boom that makes Toronto one of the fastest-growing cities in North America. And, he points out, this is unlikely to change given Canada’s “open door” immigrant policy under which “roughly half of new Canadians settle in the GTA.”
Needless to say, Mr. Olive’s views, along with those of many other analysts, are much closer to the views of the Conference Board than they are to those of the CCPA. Which view holds sway will become ever more apparent, given the emerging buyer’s market in most Canadian markets and continuing low interest and mortgage rates.
