The largest headwind for Canadian households, lenders and the economy in 2019-20 is the same force that worked as a tailwind in the decade before: real estate. Naturally, the leaders of the boom years–the greater Vancouver and Toronto areas– are now also leading the deflation cycle. And a popular plan to ‘list this spring’ suggests homes on offer are set to rise significantly in the weeks ahead.
Spring listings come to market as Vancouver already had 12,774 homes for sale in March, 52% more than a year ago and 10.2% more than a month earlier. Although 8% cheaper than last March, the benchmark composite index price for a Vancouver home is still $1.01 million today–an impossible 12.5x the $80,000 median household income in the city.
The Real Estate Board of Greater Vancouver (REBGV) reported today that a total of 1,727 homes sold in the region in March–the lowest sales total for the month since 1986–down 31% from a year earlier and 46% below the 10-year March sales average. See: Prospective home buyers remain on the sidelines in March.
Of course, the REBCV President blames governments for higher lending standards and new taxes that deter speculation, rather than the un-affordable prices and the decade-long credit party that burdened the nation with debt servitude that’ll take years to alleviate.
Canada is a stand out in this problem, but we’re not alone. According to Knight Frank, a London-based real-estate consulting firm, inflation-adjusted home-price gains have significantly outpaced income growth over the last five years in 18 of 25 world cities. See: Affordable housing crisis spreads throughout the world.
Now as prices fall, sellers tend to hold high and hope for a rebound. But new buyers have every reason to wait and watch as prices come back in line with long-term affordability metrics. Paying for the last ten years of crazy is going to take some time.
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