Saying that the housing markets in some of Canada's biggest metropolitan areas became overheated is an understatement.
Now, it appears a big chill is underway.
Here's a chart and commentary from the May Elliott Wave Financial Forecast:
Toronto and Vancouver are two real estate markets that EWFF identified as peaking in 2016 and 2017, respectively. In October 2016, EWFF recognized an important turn in Vancouver single-family home prices and placed the following headline on the chart: "Another Housing Bubble Bursts." In May 2017, we saw a familiar pattern in Toronto single-family home sales and called for "An Exponential Ending for the Rise in Toronto Home Sales and Prices". As it turns out, the tops were effectively in place for both markets. In Vancouver proper, where the average price of a detached, single-family home peaked at more than $3 million in 2016, prices were down by a third as of February.... The Toronto Real Estate Board notes that from their peak in April 2017 through March 2019, the average price for a single-family home fell 14.7%.... The chart of real estate prices... shows that the decline is just now starting to reach the rest of the country. The odds favor that the retrenchment has a long way to go.
On May 21, the Globe and Mail, a major Canadian newspaper, published an article titled "Why I welcome Vancouver's housing crash." Here's an excerpt:
It's difficult to regard the housing correction we are now witnessing without seething. Anyone who was looking could see something wasn't right with the market a few years ago. Empty homes began popping up everywhere, bought by overseas investors but never lived in. Multimillion-dollar abodes were being purchased by students or homemakers with little income. Condos purchased as presales were flipped and flipped and flipped again before ever being lived in, inflating prices exponentially along the way.
In two years, the price of real estate soared. Yet anyone who drew attention to this phenomenon and pointed to the dangers it represented risked being branded a racist. It wasn't people from another country buying property who were responsible for the dramatic rise in house prices, it was lack of supply.
That's what the politicians told us. That's what developers told us. That's what the real estate industry told us. It was supply. Build more condo towers and all would be fine. When it was pointed out that much of the new supply started at $1.5-million, which was hardly affordable, the complaint was met with shrugs. The new supply wasn't meant for locals anyway.
It was all a grubby sham. The real estate and development industry knew exactly what was happening, but had become so intoxicated from the giant profits being realized it wanted nothing to do with policies that might bring the party to an end. Well, the party has come to an end and we're seeing the result of it now.
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