Archive for September, 2014

Which country has the most overvalued real estate in the world?

Wednesday, September 17th, 2014

The most overvalued residential property in the world is in Norway, a new study reveals.

Australian home prices have risen the next highest since 1970, according to the Bank for International Settlements (BIS) Quarterly Review, with Asian prices rising the highest in the last year.

The UK, Sweden and France make up the rest of the top five highest valued markets, according to the newly-published BIS study.

But rising real estate prices in overvalued markets increase the risk of future declines, especially where wages are not growing strongly, the report warns.

“This might lead to a reversal or moderation of recent growth or a further sliding of prices. This argument would be more compelling for markets where prices have grown rapidly in the recent past, and where income growth is projected to be rather moderate.”

Norway has a reading of around 220 and Australia 200, indicating that the difference between home prices and disposable income are up to 120% higher when compared to the historical average of 100.

Out of the 14 advanced economies examined by the BIS, only the UK has house prices that come close to matching them for inflation adjusted growth over that period.

The study says current price growth was highest in the Asia and the United States with the European markets performing worst.

“Year-on-year residential property prices, deflated by CPI, rose by 9.5% in the United States and 6% in the United Kingdom. Real house prices also grew by 7% in Canada, 7.7% in Australia and 2.2% in Switzerland, three countries that were less affected by the crisis, as well as in some countries that were severely affected by the crisis, such as Ireland (+7.2%) and Iceland (+6.4%).

“Real price growth remained in negative territory in Japan (–2.6%) and was generally weak or negative in continental Europe. Prices rose in Germany (+1.2%) and the Nordic countries (+1.7% in Denmark and +4.8% in Sweden), but continued to fall in the euro area’s southern periphery (Italy, -5%; Spain, -3.8%; Portugal, -1.2%; and Greece, -6%). House prices generally grew in emerging regions outside Europe.”

In Asia, year-on-year growth rates remained high in a number of countries in the first quarter of 2014. “Prices increased in real terms in China (+13%), the Philippines (+13%) and Malaysia (+5%).”

In Latin American countries, the increase in real residential property prices was more moderate. “Prices in Brazil increased by 3.9% in the first quarter of 2014, whereas in Mexico real prices were mostly stable compared with one year ago.

“Price developments were mostly negative among central and eastern European countries, but prices in the Baltic countries rebounded sharply.”

“While for most countries the current ratio implies that price movements are not diverging from rental values in ways that imply unsustainability, for a number of other countries current property prices are much higher than those implied by the historical relationship to rents. A priori, this could be a reason to expect a price correction in the future. Interestingly, some of these countries have experienced only moderate price growth recently (eg Canada, Norway and Sweden), or even price declines (eg Australia, Belgium and France).”

BIS collects data on house prices for 55 countries. For 18 of these countries, series are available that go back as far as the 1970s.

Source: Adrian Bishop, Editor, OPP Connect

Average Canadian house price rises 5.3% to $398,618

Monday, September 15th, 2014

The Canadian Real Estate Association raised its home sales forecast Monday on the back of stronger than expected sales in recent months after a slow start to the year.

The association said sales through its Multiple Listing Service are now expected to total 475,000 homes for 2014, up from a June prediction of 463,400.

The new forecast would mean sales would be up 3.8 per cent compared with 2013.

The association said the frigid winter delayed the start to the spring home buying season and helped boost sales in May and June.

“Although this boost was and still is expected to be transitory, sales have yet to show signs of cooling as activity strengthened slightly further over the summer,” CREA said in its updated forecast.

“The increase reflects continuing strength in home sales among large urban markets that initially drove the spring rebound together with gains in markets where activity had previously struggled to gain traction. Lowered mortgage interest rates supported this trend.”

The higher forecast came as CREA said that sales through its MLS system in August were up 2.1 per cent compared with a year ago as sales were up in just over half of all local markets, led by Vancouver and Calgary.

Compared with July, sales were up 1.8 per cent.

The national average price for homes sold in August was $398,618, up 5.3 per cent from a year ago. Excluding Vancouver and Toronto, the average price was $324,738, up 3.9 per cent from a year ago.

The national sales-to-new listings ratio was 55.5 per cent in August, up from 53.9 per cent in July, within the 40 and 60 per cent band that CREA uses to mark a balanced market.

The number of months of inventory stood at 5.8 months at the end of August, down from six months in May, June and July.

Source: The Canadian Press

Which areas had the biggest home price increase in Vancouver, Toronto, Calgary and Montreal?

Friday, September 12th, 2014

When Canada’s national housing numbers are released Monday by the Canadian Real Estate Association, they’ll likely show some notable discrepancies between markets. Prices in Calgary, Toronto and Vancouver have been hot lately, but not so much in other areas.

But that’s not the whole story. Even within cities, the variations in how different neighbourhoods have fared can be significant.

So Brookfield RPS pored through its data for some of Canada’s major centres for The Globe and Mail and determined which areas (it breaks them down by the first three digits of their postal code) have had the strongest price appreciation over the last five years. Top bragging rights go to those people who bought detached houses in Vancouver’s Dunbar neighbourhood in 2009, where the average price has more than doubled.


The best performing neighbourhoods for five-year price appreciation of detached homes in Vancouver are Dunbar, North Dunbar and the Queen Elizabeth Park area, which collectively saw prices rise a whopping 96 per cent. For condos, the top spots were the West End, Davie Village and New Westminster, which collectively saw prices rise 45 per cent. In comparison, the city-wide average price for all types of homes rose by 29 per cent.

Vancouver’s market has rebounded from its slump, and prices of detached homes have hit new records. The benchmark price of houses was up 6.6 per cent year-over-year in August, to $984,300, according to the Real Estate Board of Greater Vancouver. The benchmark price of condo apartments rose 3.6 per cent to $379,200.


When it comes to detached houses in Montreal, the neighbourhoods whose prices have performed the best over the past five years are Westmount, Saint Laurent and Verdun. They collectively saw prices grow by 59 per cent. As for condos, the top locations for price growth were Saint-Lambert, Bois Chomedey and Nouveau-Rosemont, which collectively saw condo prices rise 69 per cent. In comparison, the average price of all types of homes city-wide increased 18 per cent.

Montreal’s housing market is currently showing signs of struggling, with the number of homes that changed hands during August coming in 6per cent lower than a year earlier, according to the local real estate board. Each of the main areas that the Greater Montreal Real Estate Board tracks – the North Shore, Laval, the South Shore, Vaudreuil-Soulanges and the Island of Montreal – saw sales fall last month. Sales fell by only 4 per cent in Vaudreuil-Soulanges and on the Island, making those the best performing neighbourhoods. The median price of a home in Montreal is currently $285,000, unchanged from a year ago.


The top neighbourhoods for price growth of detached houses in Canada’s most populous city were Willowdale, Agincourt and Newtonbrook. Average prices in all of these neighbourhoods combined rose by 75 per cent over five years. The top areas for condo price growth were the Fairview Mall neighbourhood, Cabbagetown and the area around Church and Wellesley Streets. Collectively their condo prices rose by 47 per cent. That compares to average price growth of 43 per cent for all types of properties throughout the city.

At the moment, prices of detached homes in Toronto’s downtown core are outperforming those in the surrounding areas. The average price of a detached home in the central 416-area-code was up 14.7 per cent year-over-year in August, while the average price of a detached home in the suburban 905-area-code rose by 9.3 per cent, according to the Toronto Real Estate Board. The same trend does not hold true for condos, because the plethora of new towers under construction in the downtown core has been constraining prices. The average resale price of existing condos downtown rose by 4.1 per cent in August, while those in the 905 area rose by 5.4 per cent.


The best areas to have bought a house in 2009, from a price appreciation point of view, would have been Killarney, South Calgary and Hillhurst, where average prices collectively rose 36 per cent in the period since. For condos, the places to have bought were the Beltline, Elboya, and Edgemont and the Hamptons. Those areas collectively saw condo prices rise by 24 per cent. The average price of all types of homes across the city rose 22 per cent.

Detached homes have become less affordable in Calgary in recent years, causing a significant rise in condo sales. Sales of existing condos rose 14 per cent year-over-year in August, while sales of single-family homes fell 2.4 per cent, according to the Calgary Real Estate Board. The benchmark price of a single-family home is now $512,300, up 10.24 per cent from a year ago. The benchmark price of a condo is $298,200, up 10.2 per cent.

Source: Tara Perkins, The Globe and Mail

How long will house prices in Canada keep rising?

Monday, September 8th, 2014

House prices in Canada continue to climb[/caption]Home prices in Canada’s major cities are running at a rate many economists just don’t think is sustainable.

We won’t get a complete picture of sales and prices in August for a couple of weeks, but preliminary figures from local real estate boards suggest there’s plenty of momentum. And that has some economists wondering about how long this will last.

“Existing-home sales remained strong in a number of major cities in August and prices continued to outrun income,” Bank of Montreal economist Sal Guatieri wrote in a research note. “How long prices can continue to outpace family income in these major cities is unknown, but it can’t go on forever. The longer it does, the greater the risk of a correction when interest rates rise.”

Falling mortgage rates helped make homes more affordable heading into the summer, according to Royal Bank of Canada. And a recent survey by real estate consulting and research firm Altus Group found home buying intentions everywhere except B.C. were up this summer compared with a year ago. “While first-time buyer intentions are down slightly, homeowners with mortgages are showing more interest,” Altus Group said.

Policy-makers probably won’t do anything to cool prices now, since many smaller housing markets aren’t running as hot as Toronto, Calgary and Vancouver.

Here’s a look at how some markets across the country performed in August, according to data released this week by their local real estate boards.


– 7,600 homes sold on the MLS, up 2.8 per cent from a year earlier, and well above the 10-year average sales level of 7,059 for August.

– the average selling price of all types of homes in Greater Toronto was $546,303, up 8.9 per cent from a year earlier.

– the average price of detached homes in the downtown area covered by the 416 area code was $902,428, up 14.7 per cent; for condos it was $370,899, up 4.1 per cent; for townhouses it was $463,798, up 11.7 per cent.


– 2,267 homes sold on the MLS, up 3.4 per cent from a year earlier; condo sales were up 14 per cent and townhouse sales up 20 per cent, sales of single-family homes fell 2.4 per cent.

– the average price of a single-family home was $545,238, up 5.42 per cent, and the benchmark price of a single-family home was $512,300, up 10.24 per cent; the average price of a condo apartment was $332,006, up 11.48 per cent, and the benchmark price of a condo apartment was $298,200, up 10.2 per cent.

– the average number of days a home spent on the market before selling dropped to 39, from 45 a year earlier.


– 2,771 homes sold on the Multiple Listing Service, up 10.2 per cent from a year earlier and 4.3 per cent above the 10-year average for August.

– the benchmark price of all types of homes in Metro Vancouver rose 5 per cent to $631,600 (the benchmark seeks to create a more apples-to-apples comparison than the average price, which can be distorted by changes in the size or location of homes that are selling.)

– the benchmark price of detached properties rose 6.6 per cent to $984,300; the benchmark price of apartment properties rose 3.6 per cent to $379,200; the benchmark price of attached properties rose 3.9 per cent to $474,900.


– 1,203 homes sold on the MLS, down 1.1 per cent from a year earlier, but a tiny bit above the five-year average of 1,199.

– the average sale price for all types of homes was $360,214, up 3.4 per cent.

– the average price for a condo was $263,996, up 2.7 per cent, while the average price of other types of homes was $381,628, up 1.9 per cent.


– 1,552 homes sold over the MLS, down 6 per cent from a year earlier.

– the average selling price of all types of homes was up 5 per cent to $368,597, the median selling price was up 5.7 per cent to $348,900.

– the median price of a single-family home rose 5.8 per cent to $402,750, while the median price of a condo fell by 0.6 per cent to $228,500.


– 348 homes sold over the MLS in the Regina area, down 8 per cent from a year ago. That was below the five-year average of 365 but above the ten-year average of 336.

– inventory levels are the highest they’ve been in more than 20 years. The number of properties for sale at the end of August was 223 per cent higher than two years earlier.

– the benchmark price was $299,600, down 2.4 per cent from $307,000 a year earlier and homes sat on the market for an average of 48 days before selling, compared with 32 days a year earlier.

Source: Tara Perkins, The Globe and Mail

Vancouver single-family detached homes hit record high prices

Friday, September 5th, 2014

Greater Vancouver and Fraser Valley home buyers have pushed up prices for single-family detached houses to record highs.

The benchmark home price index hit $984,300 last month for detached properties sold in Greater Vancouver, up 6.6 per cent from August, 2013.

In the Fraser Valley, which includes the sprawling and and less-expensive Vancouver suburb of Surrey, the detached price index climbed 3.4 per cent to $569,800 over the past year.

The record-high prices for detached houses will prompt more consumers, especially first-time home buyers, to shop for townhouses and condos, said Shaadi Faris, vice-president at Vancouver-based Intergulf Development Group.

Some baby boomers are selling their large detached homes and moving into condos while helping their children with down payments, fuelling the rally in housing prices in Greater Vancouver, Mr. Faris said in an interview Wednesday. “Locals have built up equity and are downsizing,” he said.

A variety of factors have led to property prices reaching new highs, including low interest rates, a stable economy and an influx of residents from other provinces and countries, real estate experts say.

Intergulf has been getting interest on its various projects primarily from prospective buyers who will live in their units. While there are many inquiries from long-time Vancouverites and people with recent ties to China, there are a small number of outright foreign investors, Mr. Faris added.

Intergulf began construction in early 2014 on its Empire at QE Park condo and townhouse project near Queen Elizabeth Park on Vancouver’s west side.

The index price for existing detached homes on Vancouver’s west side rose 9.7 per cent over the past year to $2,282,400, while increasing 10.3 per cent to $936,500 on the east side.

By contrast, the index price for condos on the west side reached $495,900 in August, up 5.7 per cent from the same month last year. Condo prices on the east side posted a 3.1-per-cent increase year-over-year to $313,400.

The Real Estate Board of Greater Vancouver said the region’s housing sales rose to 2,771 in August, up 10.2 per cent from a year earlier and 4.3 per cent higher than the 10-year average for the month.

“Activity this summer has been strong but not unusual for our region,” Greater Vancouver board president Ray Harris said in a statement.

In the Fraser Valley, townhouse prices nudged up 0.1 per cent to $298,500 over the past year, but condo prices fell 3.5 per cent to $196,700.

Fraser Valley board president Ray Werger said many first-time buyers in the suburbs are able to afford townhouses or smaller detached homes, including new developments in Cloverdale and Langley.

Source: Brent Jang, Globe and Mail

What is forecast for Canada’s house prices?

Tuesday, September 2nd, 2014

The risk of a property market crash in Canada has not ebbed, according to an increasing number of analysts polled by Reuters who said chances of a steep fall in prices have increased in the past year.

Still, the survey medians showed house prices will likely rise more than earlier expected at least until 2017, reflecting ongoing reluctance by forecasters, many of whom work for mortgage lenders, to predict negative returns on property.

This year Canadian home prices on average will appreciate by 5 per cent followed by a 2-per-cent rise in 2015 and then again in 2016 after doubling in value over the past decade.

But seven of 20 respondents in the poll conducted Aug 19-26 said the threat of a property market meltdown had intensified over the past year, especially in Toronto and Vancouver, up from five of 21 in the May poll.

“[The] risk has increased due to house price increases significantly exceeding income growth and the oversupply of condos in downtown Toronto,” said John Andrew, professor at Queen’s University.

Canadian households on average hold debt worth more than 1.5 times their income and when mortgage costs increase once the Bank of Canada begins raising benchmark interest rates, it will make that burden even heavier.

The BoC will probably raise rates in the third quarter of 2015, a Reuters poll showed on Tuesday. “Lower mortgage rates in the spring and summer have enticed more marginal home buyers who ultimately won’t be able to carry heavy debt load in the future when rates rise,” said David Madani, Canada economist at Capital Economics.

Still, the medians suggest prices will not decline nationally, at least not until 2017 – the end of the polling horizon. Even in Toronto and Vancouver, two of the country’s most expensive markets, prices are not expected to fall.

Many are of the view that prices will only cool, dodging a U.S.-style nosedive where property prices fell by more than a third, leaving millions of Americans in negative equity.

Thirteen of 20 participants said Canada’s housing boom is different from other real estate booms and is therefore unlikely to end in a crash.

“The risk of a crash is negligible, based on my expectation that any sustained increase in mortgage interest rates will be minimal – at most half a point by the end of 2015,” said Canadian housing economist Will Dunning.

Source: Anu Bararia, Reuters

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