The Toronto Stock Exchange is down nearly 4 per cent, but a couple of news stories are sure to cause a bit of consternation.
One is that a couple weeks ago, the Bank of Canada said the country would be the first to hit a recession if housing starts fell by 25 per cent.
The other is that the Ontario government announced a plan to sell off about 30 per cent of the province’s housing stock.
Both are headlines that are sure for the worse.
But what is worse than the headlines, is the fact that the Bank is reporting on a pair of negative news stories.
The headline of the Bank Of Canada report is that Canada will be the second-worst place in the world to buy homes.
While that may seem pretty bleak, it is not entirely untrue.
In fact, the number of homes being bought in Canada is up slightly since the fall.
But that growth is happening in tandem with a slowdown in housing demand.
This is because the average price of a detached home is rising.
The average price is up by about 10 per cent since last fall.
The pace of price growth is slowing down.
What is going on?
It turns out the Bank’s economists don’t think Canada’s house price growth rate is at its best yet.
In the fall of 2017, when the Bank reported on the country’s housing boom, it had expected Canada to have a modest pace of housing growth.
In the current data, the pace of house price increase is slowing to a trickle.
But the Bank does expect Canada to see an uptick in house price inflation by the end of the year.
The reason is because of a spike in demand in Vancouver, which is driving up the price of land in the city.
And the reason why demand is growing is because more people are buying properties.
We know this from a lot of other countries, but we don’t see this in Canada.
For instance, when economists at the Canadian Centre for Policy Alternatives analyzed data from the last few years and saw how much property prices have grown in Ontario, they found that Ontario saw the fastest rate of price increases.
On average, home prices in Ontario increased by 11.5 per cent between 2010 and 2020.
In comparison, the price in Alberta rose by just 4.4 per cent in the same period.
How do we explain this?
First, the real estate market in Canada has grown in tandem to a certain extent.
In a country with the lowest growth in real estate investment, you would expect there to be a slow pace of growth in housing.
In Canada, however, there has been a massive expansion in home prices.
It seems like the real issue is that there is a lot more housing demand in Canada than there is supply.
Second, the housing market in Ontario is much more diversified than other Canadian markets.
According to Statistics Canada, in 2019, Ontario had the most homeownership of any province.
In contrast, in Manitoba, where home ownership is still quite high, there were only a few million homeowners in 2020.
Third, there are other factors at play in the housing boom.
According a recent study from the Toronto Real Estate Board, the average home value in Ontario has risen by more than 40 per cent over the past 20 years.
The rate of increase has slowed down.
There are also some signs that the number and mix of home buyers has become more diverse.
In 2018, the ratio of new home buyers to total home sales increased in Ontario.
In 2017, it increased in Alberta and British Columbia.
Fourth, the economy is booming.
In 2019, the federal government forecast that Ontario would grow by 1.7 per cent annually.
In addition, Ontario has one of the strongest economies in Canada, and the province is expected to grow by 4.1 per cent by 2020.
And the government is predicting that the province will add nearly 1 million new jobs by 2020, with nearly 1.2 million more jobs expected to be added by 2021.
As a result, the population of Ontario is projected to rise by nearly 10 per.cent in 2020, the fastest increase in the country.
Canada’s housing outlook is a mixed bag.
On one hand, we are seeing a huge amount of demand for homes in Canada and a slowing pace of home price growth.
On the other hand, there is also a growing number of buyers who are willing to pay a premium to buy a home in Canada compared to many other countries.
Are we at the bottom of the heap?
It’s a difficult question to answer, because there are many factors at work.
But if the Bank thinks we are at the very bottom of our global peer group, then we certainly are not.
Our current housing market is very different than the one we saw in the 1990s, when real estate prices were soaring.
A major problem with the current housing boom is that it is so tightly managed