Despite Canadian households hitting a record level of debt to income at 171% in the third quarter of 2017, it appears the rate of household credit growth may actually be slowing. Recent insights from Better Dwelling and the Bank of Canada suggest credit in the household sector has been decelerating in recent months. The annualized 3 month trend of household credit growth dropped to to 4.9% in October, a 5.76% decline compared to the same month last year. This is significantly below the 12 month trend, which currently reads 5.5%. So yes household credit is still growing but at a slower pace. Mortgage credit growth also appears to be slowing. The three month annualized trend printed 5.4% in October, a 14.28% decline compared to the growth we saw last year. It was also a decline compared to the 12 month trend, which is 5.6%. So what does this mean and why is it important? Real estate prices are closely correlated to mortgage credit growth. As credit is readily available and borrowers have an appetite to borrow, house prices will rise. It works the same in reverse. If prices begin to fall and or lending policies tighten (think stress test) it can

Real Estate Hasn’t Been this Unaffordable Since 1990 per RBC Nothing says Merry Christmas like a 27 year low for Canadian housing affordability. That’s right, real estate across Canada has not been this un affordable since the year 1990 per RBC. Spoiler alert house prices tumbled shortly thereafter. RBC Bank released their updated Q3 numbers for housing affordability. To no surprise, Vancouver leads the nation in the most unaffordable market to buy a home. Followed by Toronto and then Victoria. “The deterioration in the latest two quarters, in fact, put Vancouver buyers in the worst affordability position ever recorded in Canada.” Vancouver Un affordability Sets New High In Canada “The area experienced the sharpest affordability drop among Canada’s major markets between the second and third quarters. RBC’s aggregate measure surged by 5.3 percentage points to 87.5%. This represents a new record high for any market in Canada. We see further downside to Vancouver’s home ownership rate in the period ahead. The rate fell from 65.5% in 2011 to 63.7% in 2016.” High Un affordability Tends to Lead to Recessions What RBC didn’t mention in their report is the correlation between elevated house prices that cause affordability issues and recessions. When too

Foreign Ownership Equates to 7.6% in the City of Vancouver. Is this Accurate? Statistics Canada Released their first ever foreign ownership data. You can find the full report here. To no surprise, a flurry of angry tweets filled the Twitter sphere. A polarizing political debate erupted, prompting me to reach for the block button several times. First off it’s critical to understand who is considered a “foreign buyer” “A foreign buyer is defined as a non-resident homeowner (often expressed as a “foreign homeowner”) as an individual whose principal residence is outside of Canada. “Foreign ownership,” in this case, technically refers to the non-Canadian residency of the legal owner of the property, irrespective of the owner’s citizenship. It should be noted that this definition would classify Canadian citizens whose primary residence is outside of Canada as a “non-resident.” How was the Data collected? “Land titles, property assessment data, census of population, tax and Business Register data. Statistics Canada includes individuals and corporations in its estimate of non-resident owners. Statistics Canada covers apartment-condominiums and various other housing types, including non-apartment condominiums, single-detached homes, semi-detached homes, row houses and vacant land.” So this doesn’t cover foreign buyers who might be using blind trusts. For the

Vancouver Condo Flipping On the Rise Is a Sign of The Times The number of houses being flipped is generally a pretty good indicator of how much speculation there is in a housing market. When prices are rising there’s plenty of liquidity and it seems there’s always another buyer willing to pay a higher price. Flipping a house becomes perceived as risk free. Currently we are seeing strong evidence of this in the Vancouver real estate market. I ran the numbers back in June 2017, but here are the updated numbers. For simplicity I have quantified a flip as a home that has been bought and re sold within 24 months. Vancouver Condo Flipping Hits 9 Year High With just a few weeks left in the year, there have been 685 Vancouver condos flipped this year. That’s a staggering 74% increase from the year previous. The 685 condos flipped is equivalent to 10.9% of all Vancouver condo sales this year, a nine year high. So yeah, basically one in every 10 sales this year were owners who were cashing in huge profits. Vancouver Detached Flipping Is Dead Vancouver detached prices are softening. Sellers are slashing prices, and buyer FOMO is

The HELOC (Home Equity Line of Credit) has been a blessing and a curse for Canadian households. While it has helped spur house prices and simultaneously provided consumers the ability to tap into their new found equity, it has also crippled many Canadian households into a debt trap that seems insurmountable. Between 2000 and 2010, HELOC balances soared from $35 billion to $186 billion, according to the Financial Consumer Agency of Canada, an average annual growth rate of 20%. As of 2016, HELOC balances sit at $211 billion, a 500% increase since the year 2000. While also pushing Canadian household debt to incomes to record highs of 168%. Scott Terrio, a debt consultant, says the situation is a full blown “extend and pretend” meaning borrowers are just continuously refinancing or taking on more and more debt in order to sustain their lifestyle. Canadians can extend their debt repayment terms and pretend to live a lifestyle they can’t otherwise obtain. What the HELOC has also been able to do is help spur the private lending space which has ultimately supported rising house prices. Seth Daniels of JKD Capital, one of the most astute Canada-Watchers says theres a growing trend where “a homeowner acts

Earlier this week Maclean’s released their popular Chart Week post. The article highlights 91 of the most important charts to watch in 2018. There were some excellent charts relevant to the Canadian housing market which i’ll summarize below. Here are some key charts to watch in the Canadian Real Estate space for 2018: (Thanks again to Maclean’s) Higher Mortgage Costs Are Coming Ben Rabidoux is a great follow on Twitter (@BenRabidoux) with excellent research and analysis on the Canadian lending space. “Since the early 90s, Canadian homeowners have seen continuously decreasing monthly mortgage payments at renewal. By our calculation, for every $100,000 borrowed, consumers have seen payments drop on average $91 per month for a standard 5-year fixed rate mortgage at the end of their first term due to prevailing interest rates that have been progressively lower than at origination. With the recent rise in rates, we’re now at the point where the average consumer is seeing monthly payments rise at their first renewal, something we haven’t seen on a sustained basis since the early 90s. Granted, household disposable income was rising at a 5.2 per cent year-over-year clip as of the second quarter (the highest rate in seven years)

Someone asked me the other day where I thought BC property taxes & assessments would be in 2018. It was a pretty simple answer, up. Local Governments salivate over property taxes. Let’s not kid ourselves, higher house prices are a tremendous tax suck for Governments. Higher house prices equals more tax revenues. Not to mention BC is home to the lowest property taxes in Canada, with the city of Vancouver leading the way. According to the city’s budget, property taxes are set to rise 3.9% as it would be unrealistic to raise yearly taxes by 10-30% each year despite assessments. Sure enough, BC Assessment released a report yesterday highlighting further increases should be expected in 2018. “The preliminary market analysis for 2018 property assessments is showing strong market conditions across most areas and property types in the province, with a few exceptions. Assessments for detached single family homes in central parts of Metro Vancouver, for example, will be relatively stable, while other parts of the province will see increases when compared to last year’s assessments.” 2018 property assessment highlights include: Typical detached single family homes are very stable in the Metro Vancouver areas of Richmond, Vancouver, the North Shore and

Vancouver Detached Market Continues to cool in November The Vancouver detached market continues to soften in November. Sales increased on a year over year basis but remain well below the ten year average. Buyers are getting more house for their dollar and a weak sales to actives ratio favours the buyer in negotiations. Let’s break down the numbers. Detached Sales Detached sales are reminiscent of 2012, which is considered a weak year but certainly not like 2008 after the financial crisis. Basically, houses are still selling, but sellers are facing a lot of competition with rising inventory and buyers who are looking for deals. Vancouver detached sales increased by 21% on a year over year basis but were 31% below the 10 year average for the month of November. As you can see in the charts below, detached sales are trending downwards after peaking in 2015. This is more pronounced on the West side as prices are more expensive with the West side under a ton of pressure. New Listings/ Inventory New listings are climbing rapidly in Vancouver. New listings for the month of November hit a 10 year high. There were 379 new detached listings for Vancouver, up 14%

Vancouver Condo Prices Tick Downwards In November The Vancouver condo market appears to be going through it’s seasonal slowdown. The average sales price dipped to $875,177 after hitting an all time high of $908,468 last month. However, sales are still as strong as ever and inventory remains critically low. Let’s take a look at the numbers. Vancouver Condo Sales Vancouver condo sales increased 26% on a year over year basis and were 25% above the 10 year average for the month of November. This further highlights the huge shift in demand away from detached houses and into the condo market. There’s plenty of buyers for more affordable one bedroom condos and this seems to be where investors/ speculators are focusing. One thing worth noting is it appears “peak sales” are behind us. Peak sales were in March 2016, and after plummeting during the foreign buyers tax, eventually rebounded, and now appear to be levelling off. We shall see if this trend continues in the New Year. New Listings/ Inventory Levels Vancouver condo new listings increased by 25% year over year and were 14% above the 10 year average. You’ll notice there was a huge purge of new listings last November.