Scotia: Canadian Real Estate Needs More “Calgaries”

Today’s Scotia Economics Closing Points (October 2, 2012) highlights the “extreme” regional differences in real estate across the country:

The otherwise quiet day in terms of economic data gave us the opportunity to dig through some of the numbers from regional real estate boards in Canada. What we saw was not entirely to our liking.

The bad news is that most local real estate boards including Toronto, Vancouver, Montreal, Victoria, and Edmonton, have reported year-on-year declines in the number of existing home sales in their most recent reports (most are from August, though we’re starting to see September data now).

The good news is that prices have not started to decline at a corresponding pace. We sent a note to clients on today’s release of data for September by the Vancouver and Calgary real estate boards reproduced below:

Both the Vancouver and Calgary real estate boards issued updated September sales results today and they continue to diverge from one another via continued strength in oil country versus a rapid correction in Vancouver.

This showcases the extremes in Canadian housing markets. With markets in Vancouver and Toronto (up to August, pending September) correcting at an accelerated pace mainly in terms of volumes with so far little change in prices over recent months and in the wake of the July 9th mortgage rule changes, the country clearly needs more ‘Calgaries’ as the month’s total nationwide sales figures arrive.

Full nationwide sales results are due on October 15th as the local boards continue to release before then. It was already the case that the August nationwide sales results were down 5.8% m/m in volume terms such that the buoyancy in some markets was not enough to hold up the national totals.

It is a fair point to acknowledge that the country’s sales volumes were already 11.4% lower (non-annualized) in the five months to August from the seasonally adjusted peak in February with September’s national tally yet to be factored in.

Our view is that we risk tripping relatively conservative forecasts for the magnitude of the volume correction but with prices thus far relatively firm.

So what does Cameron Muir, chief economist at the B.C. Real Estate Association think of Vancouver’s 33% sales plunge? He said the Vancouver-area housing market remains healthy, and he doesn’t see any major economic shocks on the horizon. “It’s a short-term lull in the market.” (Globe & Mail)

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