Regulatory Impact Depends On Location, Location, Location

Below are brief summaries of TD’s, BMO’s, and Scotia’s commentary on October sales figures released by CREA today.


It is commonly said that there is no such thing as a national housing market. This is especially true given the regional differentiation present in Canada. Greater Vancouver is already in the middle of its housing adjustment – the market had simply gone too far too fast and is now pulling back.

In the last few months, the Greater Toronto Area has been losing its lustre. Other areas like Calgary and Edmonton continue to post price gains so far in 2012.

No region will be immune from the macroeconomic trends and regulatory developments. That being said, the impacts to be felt will depend on location, location and location.

While regulation is having the intended impact on the housing market, it typically has only temporary staying  power. The cool down we are currently experiencing should be lifted in early-2013.

What happens thereafter is less certain. The low interest rate environment could pull homeowners back onto the market, causing home prices to once again trek upwards.

Alternatively, an absence of pent-up demand may leave the market in a bit of
a lull until interest rate hikes resume in late-2013. Under either scenario, it is safe to say that there is a low probability of out-sized home price gains over the near-term.  (Source)


Calgary: Back in the saddle… Strong population and income growth are supporting demand, with sales up almost 20% y/y in the latest 3 months. This has helped draw down the excess supply built up during the prior boom—the market is now close to full-scale sellers’ territory.

As a result, prices measured by the MLS HPI were up a solid 6.7% y/y in October, though affordability is still favourable relative to Toronto and Vancouver, with prices little more than 4x median income.  (Source)

Scotia Economics

Regional trends continue to diverge. Home sales in Alberta and Saskatchewan have strengthened this year, underpinned by a relatively stronger economic and labour market performance, with sales volumes in both provinces up about 10% over 2011. In contrast in B.C., which faces the greatest housing affordability challenges, sales have dropped about 10% this year. Most other regional markets are relatively stable.

We expect housing demand to remain on the softer side for now, as households become more cautious about adding further to their already high debt loads. This could put some downward pressure on prices, especially in markets that have already shifted into buyers’ territory (e.g. Vancouver) or in certain market segments that are potentially oversupplied (e.g. condominiums in Toronto).

However, with the Canadian economy continuing to post modest if unspectacular growth, and sellers proving responsive to the underlying shift in market conditions, a sharp decline in prices nationally is unlikely. (Source)

One response to “Regulatory Impact Depends On Location, Location, Location

  1. Calgary is Canada’s new hot spot while Toronto and Vancouver face moderate price declines

    BMO, Focus November 16, 2012

    October real estate figures show a clear divide between most regions in Canada and the two priciest cities. In most provinces, while sales have cooled from last year’s highs, they remain above their past-decade norm, indicating a still-healthy market. Saskatchewan, in particular, remains strong, though sales have slowed.

    Meantime, Calgary is the new hot-spot after a five-year drought, with sales up 19% y/y in the three months to October, and benchmark prices up more than 6%. Across most regions, price growth has slowed but is positive, suggesting the long-awaited soft landing in Canada’s housing market is underway.

    Read entire report here (page 4)

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