Something strange is happening in the Canadian housing market. The number of sales are down, yet some areas are reacting differently to others. In the Greater Toronto Area,
sales (not prices) were down 40% in July
As to whether prices are up or down, that appears to be up for debate.
According to the Teranet house price index, house prices were up 14% year-over-year as of July. However, the Toronto Real Estate Board's data showed the average house price falling by 19% from April to July. While some feel Teranet's numbers, which reflect land registries, may be dated, the Toronto Real Estate Board's 19% decline may not be a direct comparison. From what I can see, there isn't a way to determine if the compared April to July numbers were for similar homes.
However, we do know the government's recent regulations and the interest rate hike have dramatically reduced the number of home sales. That being said, we'll likely need to wait at least a few more months to see how things turn out.
----- meaning to be taken with a grain of salt
----- I've talked to a number of people who have decided to take their homes off the market due to lower than desired bids. A good friend's agent also mentioned that she has seen a considerable weakening in prices over the last few months.
Given the housing sector has been the
biggest contributor to Canadian economic growth
the past few years, and is responsible for nearly one million jobs in Canada, should the number of sales and prices fall off, it could have fairly negative repercussions for the Canadian economy.
In terms of how a potential real estate crash would affect our portfolios, we would likely weather the storm far better than most due to the fact that we probably have less of a home country bias than other investors. We have significant international holdings, and, of the Canadian securities we hold, more than one third are in the energy sector (considerably more affected by oil prices than the Canadian economy).