![]() With mortgages as cheap as they’ve ever been (five-year rates can be had for as little as 2.84 per cent) and no spikes in unemployment, there can only be one explanation: Canadians bid home prices up so high, and piled on so much debt, they’ve essentially spooked themselves. The trend is expected to continue next year. The Canada Mortgage and Housing Corporation reported a third straight month of falling housing starts in November. The weakness is also evident in new home construction. With all those houses lingering on the market, prices dipped in 10 of 11 big cities across the country between October and November, according to the Teranet-National Bank index. Ottawa’s sales were down nine per cent and Edmonton’s were down six per cent. In Montreal, sales were down 19 per cent last month. In Victoria, existing home sales were down by 22 per cent in November from a year earlier. The peak may have been reached in March when one Toronto bungalow made headlines after selling for $1.1 million, more than $420,000 above the list price.Įight months later, the story has been reversed. As recently as last spring, bidding wars were common in many Canadian cities as were the “over asking!” stickers agents slapped on “for sale” signs. The sudden cooling in Canada’s housing sector seemingly struck without warning. “If you take that away, it’s just going to knock the lights out.” Other than housing, “the key pillar of strength is our booming resource sector,” says Madani. “I feel like Canada is in the path of a perfect storm here,” Madani says. Meanwhile, Europe remains mired in a recession and concerns about China’s growth persist. debt crisis, which, if handled poorly, could tip the world’s largest economy back into recession, taking Canada along with it. “I know I’m a bear, but the housing market itself has the potential to put us in a recession, let alone what’s happening in Europe and the U.S.”Ĭanada could be setting itself up for a devastating one-two punch: a painful domestic housing slump just as Canada’s export and resource-driven economy is hit with falling global demand. ![]() “I’m getting very nervous,” says David Madani, an economist at Capital Economics, who has been predicting a drop in housing prices of up to 25 per cent in Canada. If the decline picks up speed, as many believe it will, there could be a nasty snowball effect. ![]() The only question now is how bad things will get. With few exceptions, the impact will be indiscriminate as the euphoria of rising house prices is replaced by fear. And you don’t have to own a tiny $500,000 condo in downtown Toronto or a $1.3-million bungalow in Vancouver to get hurt. Even the Bank of Canada, which has helped inflate the bubble by tempting Canadians with years of rock-bottom interest rates, has issued a rare warning about the risks posed to the broader housing market of too many condo developers in cities like Toronto and Vancouver chasing too few buyers.Ī housing correction-or, possibly, a crash-is no longer coming. Some proposed projects have been put on hold, while some angry investors-like those who bought luxury suites at the Trump International hotel-are desperate to get their money out, and have turned to the courts. Condo sales are down by 30 per cent, while prices have fallen by 4.5 per cent. In Toronto, the city’s once insatiable demand for living in 650 sq.-ft. It’s not just Vancouver where realtors’ BlackBerrys no longer buzz. “One day the phone just stops ringing,” Roy says. The lesson? Recognizing a looming real estate downturn is more art than science once it shows up in the numbers, it’s too late to do much about it. Sensing a shift in the market, Roy put his own house up for sale in June and penned a blog posting the following month that advised people to “cash out.” Though he was criticized by fellow agents for breaking rank, Roy says he now feels vindicated after watching Vancouver home sales crumble to their lowest point in more than decade, with prices falling 3.5 per cent since hitting a high last May. The next shoe to drop was a handful of homes in desirable west side neighbourhoods that took a few extra days to sell. “When you hear about a homeowner who thinks his neighbour got too much money when he sold his house, you know there’s something going on,” says Roy. The realtor says he was tipped off not by industry statistics, but by chatter across backyard fences. Keith Roy began warning his clients about a faltering Vancouver housing market in early 2012.
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