Has Canada's Real Estate Peaked?


Rob Carrick Image Rob Carrick Columnist, The Globe and Mail

Not even the Great Recession could stop the boom in some Canadian cities where home prices have been rising for decades...but numbers may be pointing to a change, writes Rob Carrick, reporter and columnist for The Globe and Mail.

Housing market, meet the stock market.

You two have a lot in common, though plenty of people believe you’re worlds apart. They think the housing market is a very smart place to invest, while stocks are treacherous. They’re half right. Stocks do have a nasty side, but so does residential real estate.

We may be seeing it emerge in the latest resale housing numbers. Sales across Canada fell 12% on a year-over-year basis in November, and prices dipped almost 1%. Vancouver sales were down 29%, and prices fell 1.7%; Toronto sales fell 16%, while prices moved 1.6% higher.

There’s no consensus on what’s ahead for real estate—forecasts for price declines of 10% to 25% are floating around, and yet there’s also a view that low interest rates could pump some life back into housing as the spring buying season begins.

But our mission here is not to say where the housing market is going. Rather, it’s to wise people up to the fact that house prices in Canada have fallen hard before, and taken years to rebound.

Data from the Canadian Real Estate Association show home prices have fallen six times on a calendar year basis over the past 30 years. In Calgary and Vancouver, they’ve fallen in nine years; in Toronto, five years. The S&P/TSX composite index, the benchmark for Canada’s stock market, has fallen ten times since 1980 with dividends factored in.

No question, stocks are a rougher ride.