Want to see how wacky Canada’s residential real estate markets have become? Check out the total value of all cities. Statistics Canada (StatsCan) just released the total value for all residential real estate in Canada… for 2015. Despite the “old” number, it’s still useful for making broad market observations. Especially when you realize the whole country saw the value of residential real estate more than double in less than a decade.
Wait… Why Do We Care About Residential Real Estate Values In 2015?
You don’t. Just playin’! It’s not ideal that StatsCan is releasing 2015 data in 2018, but it’s still useful for observing how valuations across the country are evolving. Local pricing is largely obfuscated, which leads to emotional premiums. People are sometimes convinced their city is the next booming capital of industry, and will pay a lot more to ensure their “spot” is reserved. Unfortunately, sometimes it’s just s**ty monetary planning or national exuberance. It’s a lot easier to spot a problem if the whole country is seeing prices double. Rather than debating if permit times is why you’re paying twice what your neighbour did.
Once again, not ideal that we’re working with 2015 numbers – but that’s the speed the government works at. Try not to tell them what happens to prices in 2016, and beyond. We kind of want to see their reaction when they find out there’s been a national housing crisis for three years. Ready? Let’s look at the numbers.
Canadian Residential Real Estate Is Worth $4.8 Trillion
The Canadian residential real estate market may be one of the few things bigger than the debt pile. Stats Can analysts estimates the total residential market was worth $4.821 trillion in 2015, up 7.42% from the year before. The value of all residential real estate more than doubled over a 10 year span. You know, making nice and conservative movements.
Canadian Residential Real Estate Value
In trillions of Canadian dollars.
Source: Statistics Canada, Better Dwelling.
Nearly Half of Residential Real Estate Value Is Held In 3 Cities
The concentration of the Canadian population in just a few metro areas really concentrates the value of real estate. Toronto residential real estate was worth $1.16 trillion, just over 24% of the total market. Vancouver was worth $657.2 billion, 14% of the total market. Montreal represented $439.41 billion, 9% of the total value. The three cities compose over 47% of the total value of all Canadian real estate. Interesting, considering we’re not even including large cities like Calgary here.
Canadian Residential Real Estate Value By City
In trillions of Canadian dollars.
Source: Statistics Canada, Better Dwelling.
The “Value” of These Cities Doubled In Less Than 10 Years
The total value of these cities has been rising fast, even before the the climbs we saw over the past couple of years. Toronto’s value was up 11.83% from the year before. Vancouver saw the total value increase by 15.22% from the year before. Montreal saw an increase of 7.36% from the year before. All 3 of these cities saw the value take less than 10 years to double.
Interesting to see residential values make no decline after double digit gains going into the Great Recession. The pace of growth continued at very high rates, not just in major cities, but across the country. Also worth taking note of the timeline. The whole country was making lofty gains since before foreign capital started landing in significant quantities.
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Wait, Halifax doubled at the same time? Why would all cities double? I need more!
The data calls out the role of bunk monetary policy. It’s debt deflation, but improperly measured due to grossly inaccurate CPI. The rate at which your money is being devalued likely contributes to a third of the gain, fundamentals for a third, and a third exuberance.
What everyone’s missing is we’re assuming the bureaucrats at StatsCan, issuing a method of inflation tracking developed in 1980s, are doing it right. That’s most likely not the case. We don’t talk about his inaccurate policies were before that, which resulted in the near collapse of the Canadian dollar.
I’ve been overweight on cash (sold off bonds a few weeks ago) but I am really worried about the future of our dollar. I’ve been thinking gold, silver, and oil but I really have no idea what the safe play is. I feel like USD could be a good hold for the short term, might even buy a bitcoin for shits and gigs.
Any thoughts on this?
I bought physical silver a year ago at 15.50, its now 16.40. Its been very stable the last couple of years. A little something for you – In 2008 price was as low as 8.92 after crash it went 48.48.
How is the stock market doing by the way? hmmm
Grizz, I’m actually asking myself the same question. It’s looking more like CAD will drop further. USD 2way conversion will eat up 5% so return should be at least 8% (which won’t be risk-free). We can give up yield and hope to earn money by USD/CAD appreciation growth but then it would be pure speculation.
Gold.. there will be conversion loss there too + storage cost. But gold is usually the best “store value” option.
Let me know if you come up with something and I will let you know if I make any decision here.
If you’re looking at USD/CAD check out Norbert’s Gambit
Thanks for the hint, Matt. Never heard about it, will look into it.
Cheers you too. If I find any good hits I’ll pass it on
Ola,
rates go down – prices go up (everywhere).
Rates go up – prices go down (you may not see it now but fundamentally that’s what will happen)
Funny that it doesn’t matter how much the people lending you money to buy houses say it, people refuse to listen. The BoC has been saying this for nearly a decade.
High home prices remove free cash flow from the economy, and drag growth. The only reason the government won’t say it, is the banks are one of the country’s biggest assets. A lack of confidence in them, makes the whole country fucked.
No Calgary? Come on!
If prices doubled over 10 years, why is it unrealistic to expect them to continue to double every ten years? At the very least, it’s performing better than the stock market.
because in 50 years a 100,000 property would be at 1.6 mil.
It’s Moore’s Law aplied to real estate. This principle assures us that home prices will double every two years or so. It’s not conjecture, it’s pure science.
I think now is a better time to apply Murphy’s Law to Real Estate
lol. I just saw two analysts predicting US recession in 2020. Retweeted it.
Yes, not a Canadian, but US one.
If that really happens we’ll return back to the stone age.
2020 may sound too early for me but it’s definitely coming. 2022-2025 maybe.
In any case it will destroy whatever is left after our recession and “soft landing” dream.
I’ve seen a lot of charts, but there was one posted here a while back that totally blew me away — it
illustrated the relationship between low unemployment and recessions. Without exception, since and including 1929, U.S., a recession has always followed peak employment, which is where things are at now.
If that pattern holds, we’re looking at a recession down there starting in 18-24 months.
Vnm, the funny thing is that it was me who posted this chart:)
There is another one – “Yield curve” which shows that almost every time it happens – recession follows shortly. We are not here yet but we should expect yield curve to become inverted by the end of this year.
I’m talking about US yield curve now.
If prices doubled over 10 years, why is it unrealistic to expect them to continue to double every ten years?
You just answered your own question. Unless you believe a doubling every decade forever is a reasonable expectation.
At the very least, it’s performing better than the stock market.
Which stock market? The S&P500 and DOW have quadrupled since their bottom in March 2009.
Oh Sammy, I needed a good laugh…keep it up.
Simple Sammy,
The cost of servicing debt was cut in half (people could afford to borrow twice as much), or in other words too much cheap money in the system e.g.
fixed rates were at 5.5 to 6 percent 10 years ago. (2008) my house was 330k.
Fast forward to 2015 and fixed rates dropped to 2.59 to 3 percent. my house went to 670k.
In April 2017, I could have got as much as 800k, variable rates were as low as 1.99. As of may 2018 my house is back to 700k and fixed rates can be had for about 3.5 with good credit.
Sammy if rates go back 5.5 or 6 percent home prices will revert to similar prices as seen in 2008.
BOC rates were as low as .5 enabling this exuberance, since then they’ve raised rates three times to 1.25, the goal is 2.5 to 3.5, which would bring rates right back to 5 to 6 percent fixed, home prices will be cut in half as people can only pay what the bank will lend them due to cost of servicing debt. Hopefully you will lock in and not be affected, most people are f#@ked and will default as the rates keep climbing and our economy slows.
I really hope that you’re joking or that you spoke before doing the math.
https://biv.com/article/2018/05/realtors-developers-brace-crash
“In April, just 43% of pre-sale condos offered in Metro Vancouver sold, compared to 94% in January, 83% in February and 63% in March,”
There goes your floor Vancouver.
I like the last bit in that article:
“He added that, like the last downturn in 2008, people would likely be surprised at how quick the recovery will be.
‘This is Vancouver,’ agreed Bell.
‘It will come back.'”
Things do not go up forever at a high rate compared to inflation. If they did, we would all quit our jobs and flip properties until we retire. The perception that things will come back, is always misguided. It’s like losing a few rounds in the casino, and then hanging out around, thinking your luck is going to change.
Thanks Grizz, nice find.
Vancouver will definitely go down first. Overall inventory is at 5 months already and is only getting bigger. Toronto is still way behind in inventory.
Hmm…look at where the R^2 takes off (roughly using my ruler on my screen lol…2010…same time rates were:
a) reasonably high making sure people only made good decisions and aiding the move up cycle
b)low but not historic, helping canadians save a few buck in interest
c)historic low rates that fed a national, and global, asset bubble across many sector, specifically housing in Toronto & Van.
And this is 2015, I’d like to know where we sat by H2 2017. 2014 vs 2015 saw a delta of ~$300bn, assuming at a minimum the same rate of increase we’ve added another half a Trilly? Maybe almost $750bn? WTF…
Start of 2015 BOC rate was 1% got two cuts that year to bring it to .5.
hey, can any one of you rich guys give me a loan? i’m behind on my rent.
Sorry Ketchup Chips/Zhang/Frank Diesel/Peter, but I don’t lend money to insolvent losers. Besides, I’d just be enabling your meth addiction.
quit lying. you are a renter and have no money. i would step on you if i ever met you
Almost right. I am a renter and have no debt and plenty of savings and liquid assets. Unlike you, an indebted loser who thought taking out a HELOC against your primary residence to buy an “income property” would be your ticket to the big time. Now that the Toronto market has fallen on your head, you’re broke, and lash out at those with bearish sentiments because it’s easier to blame others for your failures. You’re so embarrassed by your predicament that you can’t even log in twice under the same screen name.
Either that or you really are a successful property investor (didn’t you tell us you’re a tax lawyer with four properties last week?) who shows up here to troll and hurl insults because that’s exactly what successful people do with their spare time. I’m sure that’s it. 🙂
https://www.thestar.com/business/real_estate/2018/05/10/higher-interest-rates-add-to-home-buyer-struggles.html
Mortgage broker Samantha Brookes of Mortgages of Canada says she’s already seeing clients struggling under new higher rates as they try to renew their loans.
“A lot of people are literally on the brink of losing their home or having to sell,” she said, adding that she has advised some to consider the latter option because they have re-financed their homes to the point where they have no equity remaining.
“People have been using their homes as ATMs over the last few years because the market has been going up so quickly,” she said
Grizz, remember I posted Purchasing Power drop impact caused by interest rates increase and B-20. John Pasalis (president of Realosophy) expressed some concerns and made me redo the math. It did reduce it a little but the numbers are solid, confirmed even by BoC findings.
Every 1% in interest rate will remove about 6-8% of buyers (or reduce prices by that amount).
B-20 will remove 12% of all buyers (on paper) and probably 6% (in real life) if we assume 50% will cheat.
This is huge impact. And rate increases force existing homeowners to sell too if they can’t afford higher payments (7-8% increase for every 1% of rate increases)
“A lot of people are literally on the brink of losing their home or having to sell,” she said, adding that she has advised some to consider the latter option because they have re-financed their homes to the point where they have no equity remaining.
And that’s why our resident troll Carl/Peter/Zhang/Ketchup Chips/Frank Diesel is so distraught right now. I can imagine the pressure he’s under.
We owe $2 trillion household debt today, and yet all real estate in 2005 in Canada was worth $2.5 trillion ($3.25 trillion inflation-adjusted). That’s a scary reality for the housing market.
Just a note, I think some of these graphs would be better to use inflation-adjusted numbers.