What a difference a year makes.
In January of 2016 horror stories were beginning to emerge about what would soon be confirmed as the biggest housing bubble in Canadian history, courtesy of a massive flood of Chinese "hot money" flooding into Vancouver, which quickly became one of world’s hottest housing markets. As Bloomberg writes, buyers turned up throughout the winter for bidding wars and sales reached an all-time high. Fast forward to last week, when the Real Estate Board of Greater Vancouver reported transactions in Metro Vancouver plunged 40% in January over a year earlier, and down 11.1% relative to December, as both buyers and sellers continue to sit on the amid confusion over whether the recent price gains will continue or whether the bubble has - as we reported last summer - finally burst.
That’s the seventh straight month of declines, according to data compiled by Bloomberg, and January's sales were 10.3% below the 10-year average for the month. The ratio of sales to listings - used by the industry as a harbinger of prices - is also at a two-year low, according to the board.
And while transactions remain in free fall, prices have still to materially correct, with benchmark home prices up 15.6% in January from a year ago. The average benchmark selling price of a single-family detached home in the Greater Vancouver Area rose 15.8% y/y to C$1,474,800.
The slowdown is hitting the market for single-family detached homes the hardest. Prices last year had been rising in double digits at this time. In the past six months, they’ve fallen 6.6% to C$1.47 million ($1.13 million), and a 0.6% drop compared to December 2016.
As BBG adds, in September, Vancouver topped a list by UBS Group AG of global cities most at-risk of a housing bubble. Since then, predictions of a downturn in Canada’s priciest real-estate market appear to be materializing after a 15% tax on foreign buyers in August and tighter mortgage rules from the federal government in October. Home prices in the Greater Vancouver region are headed for an 8.5 percent drop this year, Royal LePage forecast last month.
“It’s a lukewarm start to the year,” Dan Morrison, the board’s president, said in the statement. “Home buyers and sellers are more reluctant to engage so far in 2017.”
And while the future of the Vancouver housing bubble remains still in limbo, there are no such concerns about Toronto home prices, which rose more than 20% for the fifth straight month as buyers contended with a shrinking supply of properties on the market. The average home price in Canada’s biggest city jumped 22% to C$770,745 ($591,697) in January from a year earlier, according to the city’s real estate board, and sales climbed 12 percent to 5,188 deals Bloomberg reported. The number of active listings was half the year-earlier figure, and the average days on the market fell to 19 from 29.
“As we move through 2017, we expect the demand for ownership housing to remain strong, including demand from first-time buyers,” Larry Cerqua, president of the real estate board, said in a statement. “However, many of these would-be buyers will have problems finding a home that meets their needs in a market with very little inventory.”
What may be most interesting is that at current run-rates, the two housing markets may soon hit an inflection point, where the average Toronto home costs more than its Vancouver peer: the price for an average detached home in downtown Toronto was C$1.34 million and rising at a bubbly 22% pace, which is rapidly approaching the C$1.5 million average price in Vancouver, and falling. Housing in the western city has cooled, with a foreign-investor tax and escalated prices keeping many buyers on the sidelines, which prompted many foreign buyers to shift to Toronto, as we cautioned in September, and as the data now confirms.