For some time now, when economists were referencing overheated Canadian real estate markets they pinpointed two cities in particular: Vancouver & Toronto. Recent bank commentaries have begun including Calgary as prices here have been rising at double-digit percentages.
Last month RBC cautioned that “affordability will be strained by home prices outpacing income gains in key markets such as Toronto, Vancouver and Calgary.”
In a research note today, BMO had this to say: “The only gripe is that prices in the three hot regions—Calgary, Toronto and Vancouver—are rising faster than family income, further straining affordability. While there will always be condos to satisfy the demand for reasonably affordable housing in these cities, the widening gap in prices versus detached homes means that a lot of young, growing families will be forced to live the condo lifestyle for much longer than they intend. In addition, continued rapid price gains in these cities will increase their vulnerability to a shock.”
Fortunately for buyers and the overall health of the market, Calgary region new housing construction is booming which will alleviate the supply crunch. With prices having recovered to near or above 2007 prices, we’re experiencing high levels of new listings, further easing pressure on the market.
The other side of the supply equation is demand and through two weeks this month, buyers have been out in force. Between August 1-14, there have been 1001 total sales which is on pace for the best August on record.
After an extremely weak opening, the luxury market exploded with activity in week 2 bringing the month-to-date total to 33 sales. Early signs are that the mortgage rule change CMHC put in place effective July 31, 2014 (no longer offering mortgage insurance for homes that cost $1 million or
more, regardless of the down payment amount) has had little impact in curbing the high-end market.