Canadian real estate has been experiencing a bit of a lull, and the new home market is no exception. Statistics Canada (Stat Can) data shows new home prices saw annual growth hit a multi-year high in June. The high was due to momentum though, as price growth had been decelerating more recently. Growth appears to be soaring still, but it’s actually losing steam very quickly. The longer-term trend just hasn’t caught up to more recent activity yet.
Canadian New Home Prices Hit A New Record High
Canadian new home prices slowed in growth, but still printed enormous annual gains. The index showed prices climbed 0.6% in June, and are now up 11.9% compared to a year before. Prices in the index reflect a new all-time high right across the country.
Monthly Growth Is Slowing Down Very Fast
The agency did mention a slowdown multiple times though. Stat Can notes this is the second month of declining growth. They additionally mention the monthly climb is the smallest seen in the past six months. A slowdown is definitely happening.
Canadian New Home Price Growth
The index price of a new home across Canada.
Source: Stat Can; Better Dwelling.
Canadian New Home Prices See Largest Annual Growth Since 2006
What they didn’t mention is how large the rate of annual growth is currently. At 11.9% in July, new home prices made the largest annual climb since 2006. If it rises above 12%, it’ll be the highest rate since the late 1980s. Despite smaller monthly gains, the market may have enough steam to print that record.
Canadian Annual Growth May Rise Next Month, But It Wouldn’t Be What Is Seems
The 0.6% growth seen for the month of June might be the smallest gain in six months, but it’s still a big one. It helped to push the 3-month annualized rate of growth to 15.7% in June. Lower than the past few months, but much higher than the 12-month rate.
What does this mean? Annual growth may push to a new high in July, even if more recent numbers are slowing. That might give the impression of an accelerating market. However, the reality is it’s already begun to slow down, the data just hasn’t caught up with it yet.
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The higher growth is all in places like Waterloo and Kitchener, where people have convinced themselves there’s going to be no premium for living in Toronto as there is for the suburbs.
They’re kidding themselves when Toronto developers are willing to give away a ton of free stuff when you buy.
Another reason the new home price game is all screwed up. They would rather build the inside out of solid gold to make sure prices don’t fall, so buyers around the home aren’t impacted by the drop.
If you can get a high-quality home for the same price as a moderate one, there’s no difference in price? Hedonic adjustments are usually crap for this kind of stuff.
New home prices are basically where existing home prices will be in three years. If these start to fall, a world of pain is in for the existing home market.
For anyone that’s curious, there’s a base effect on 2021, but none on 2006. That means it’s totally different in terms of strength, since many will see that and not realize it doesn’t have a secure base, only a perceived footing, unlike in 2006.
Facts:
1. Entire world printed tons of money last year. Canada is a very small percentage of the world GDP yet world’s wealthy come to Canada. Which means lot of that magic money will come once the boarders open.
2. Vast majority of Canadians are home owners, the government will not allow house prices to fall in any meaningful way. Just google what happened to HongKong when an official tried to lower home prices. Millions marched and protested. Now everyone there are living in expensive shie boxes.
3. Toronto and Vancouver are way over priced. This will spill over to other cities.
Given those facts what is your next move?
Delusional thinking is part of the bubble.
Do you know how many immigrants are coming to the us annually? From all over the world. Every single year over 1 million. They don’t scream about lack of housing. There are tons of accommodations for rich and poor immigrants in the us. Its not a privilege to have a house in the us. In Canada, it is. Because of elite government monopoly on everything.
Slavery of modern days.
I am not sure about you guys. I am a believer that some capable guys can just keep house price rising.
They can find 1001 ways to cut the supply. Stop issuing building permit because not enough staff to take care of the paper work. Or no land to build any houses because we need to keep our environment clean. Or do not build any high rise this neighborhood or any neighborhood because people want to enjoy quality life.
All for good causes.