The chart above shows the “real” price of the TSX real estate index (RE/CCI green dotted plot line) and the “real” price of the TSX gold index (Gold/CCI yellow dotted plot line).
The chart above shows the “real price” of Vancouver, Toronto & Calgary SFDs when looked at from the point of view of the BoC Canadian Commodity Index (CCI) and Borrowing Costs (retail 5yr Mortgage) which are the main input costs apart from operating expenses and tax.
COMPARE PRICES in $CAD and $USD for Single Family Detached Houses in Vancouver, Toronto and Calgary with FX and Crude Oil Notations
With soft housing data last week and higher interest rates expected, it is a good time to ask:
Is the housing rally over?
The big economic news last week was the Fed policy decision and guidance. Friday’s announcement of the Amazon purchase of Whole Foods grabbed the headlines. Attorney General Sessions’ Senate Testimony got the gavel-to-gavel treatment.
Our question from last week – a possible change in market leadership – did attract some discussion. Friday’s grocery news is still being digested, but the sector shifts were pronounced.
I always start my personal review of the week by looking at this great chart from Doug Short via Jill Mislinski. Despite the mid-week Fed announcement, the result for the week was barely changed.
SummaryChina’s new controls seek to slow down capital flight.
Canada’s housing boom is vulnerable.
The Canadian dollar’s rally is overdone.
We’re headed for another housing bust. This time in Canada. And the key is China.
It’s no secret that Chinese investors, seeking asylum from the slow-motion credit bust underway there, have been dumping tons of cash into Canadian real estate.
But it looks like a number of events are coming together at the same time to blow up that market before the end of 2017.
At the old Vancouver price peak in April 2012 before Torontonians joined the party, Vancouver metro SFDs were 64% more expensive than Toronto comparables. In July 2016 at the peak of Vancouver SFD prices, they were 65% more expensive. The gap is closing quickly; it’s narrowed down to 33%, and now strata prices are similar within 9% of each other.
In March 2017 the Monthly Absorption Rate based on total inventory and total residential sales hit 154% in Toronto vs Vancouver at 47%. Vancouver may have led the FOMO crowd up the ladder, but Toronto maybe sending them down the snake.
…click HERE to view attempt to visualize the distortions of the market
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