The Globe and Mail just published this article about Canada's real estate markets. It's behind a paywall, but if you're able to access it, you'll find 10 housing charts. The first is called "Winners and losers," and what it shows is the percentage change in CREA's home price index since February 2022 — which, in hindsight, was the top of the market. (I don't know what the end date is for this data, though.)
The first thing you'll see is that, very broadly, there's Southern Ontario and Greater Vancouver, and then the rest of Canada. Prices have fallen materially in Canada's most expensive markets, whereas in cities like Calgary, Saskatoon, and Moncton, nominal home prices are up by double-digit percentages. There isn't just one Canadian market.
The other thing I found interesting is the title "Winners and losers," because it reminded me of the great paradox of modern housing policy. And by this I mean: which cities are winning and which are losing? If you already own a home, then winning is positive price appreciation. But if you don't already own a home and you'd like to in the future, well then, falling home prices is winning — they've just become more affordable.
Not surprisingly, it's hard solving for two opposing kinds of winning.
The Globe and Mail just published this piece about job cuts across the real estate industry. And pictured in the article is my friend Norm Li, who runs a renowned visualization company here in Toronto, but just recently had to lay off 75% of his team.
This is sad — and quite a departure from the way things were before 2022. You used to have to book Norm and his team many months in advance just to get in the queue. That's how busy they were creating visual content for the architecture and development industry.
But there's not much you can do when the market more or less shut offs. And Norm is not alone. The article estimates that there are some 536,300 jobs in the new construction sector in Canada. And based on the way the above chart is looking, up to 170,000 of these jobs are currently at risk of disappearing.
Longtime readers of this blog might remember a post that I published back in 2016 where I talked about the genesis story of Toronto-based developer David Wex and his company Urban Capital Property Group. In it, I wrote about his first project at 29 Camden Street in the Fashion District. It had a total of 55 condominium suites and an average price per square foot of ~$195. And it took somewhere around 2 years to pre-sell enough of the suites for construction financing.
The reason I bring this up today is because when I originally wrote the post, it seemed so far from reality. In 2016, I said that these same 55 suites could be sold within 2 hours at $800 psf! But now things have changed once again. The market realities that David was facing in the mid-90s with Camden Lofts feel remarkably similar to today. Selling even 55 suites might not be a sure thing. And this is the first time in over 2 decades that the market has been like this.
So for fun, let's consider what happened in the late 80s and 90s. The Toronto housing market peaked in 1989 at an average price of approximately $273,698 (according to the Toronto Regional Real Estate Board). It then went on to decline 27% over the next 7 years, finally bottoming out at approximately $198,150 in 1996. So it took around 8 years for the market to stabilize.
The Globe and Mail just published this article about Canada's real estate markets. It's behind a paywall, but if you're able to access it, you'll find 10 housing charts. The first is called "Winners and losers," and what it shows is the percentage change in CREA's home price index since February 2022 — which, in hindsight, was the top of the market. (I don't know what the end date is for this data, though.)
The first thing you'll see is that, very broadly, there's Southern Ontario and Greater Vancouver, and then the rest of Canada. Prices have fallen materially in Canada's most expensive markets, whereas in cities like Calgary, Saskatoon, and Moncton, nominal home prices are up by double-digit percentages. There isn't just one Canadian market.
The other thing I found interesting is the title "Winners and losers," because it reminded me of the great paradox of modern housing policy. And by this I mean: which cities are winning and which are losing? If you already own a home, then winning is positive price appreciation. But if you don't already own a home and you'd like to in the future, well then, falling home prices is winning — they've just become more affordable.
Not surprisingly, it's hard solving for two opposing kinds of winning.
The Globe and Mail just published this piece about job cuts across the real estate industry. And pictured in the article is my friend Norm Li, who runs a renowned visualization company here in Toronto, but just recently had to lay off 75% of his team.
This is sad — and quite a departure from the way things were before 2022. You used to have to book Norm and his team many months in advance just to get in the queue. That's how busy they were creating visual content for the architecture and development industry.
But there's not much you can do when the market more or less shut offs. And Norm is not alone. The article estimates that there are some 536,300 jobs in the new construction sector in Canada. And based on the way the above chart is looking, up to 170,000 of these jobs are currently at risk of disappearing.
Longtime readers of this blog might remember a post that I published back in 2016 where I talked about the genesis story of Toronto-based developer David Wex and his company Urban Capital Property Group. In it, I wrote about his first project at 29 Camden Street in the Fashion District. It had a total of 55 condominium suites and an average price per square foot of ~$195. And it took somewhere around 2 years to pre-sell enough of the suites for construction financing.
The reason I bring this up today is because when I originally wrote the post, it seemed so far from reality. In 2016, I said that these same 55 suites could be sold within 2 hours at $800 psf! But now things have changed once again. The market realities that David was facing in the mid-90s with Camden Lofts feel remarkably similar to today. Selling even 55 suites might not be a sure thing. And this is the first time in over 2 decades that the market has been like this.
So for fun, let's consider what happened in the late 80s and 90s. The Toronto housing market peaked in 1989 at an average price of approximately $273,698 (according to the Toronto Regional Real Estate Board). It then went on to decline 27% over the next 7 years, finally bottoming out at approximately $198,150 in 1996. So it took around 8 years for the market to stabilize.
If you look at the comment section of the article you'll find that a lot of people either couldn't care less or actually relish the fact that the real estate industry is shedding jobs. A lot of people responded with "good." This is not at all surprising (and not just because it's, you know, a comment section). Homes remain unaffordable in Canada.
In the first quarter of this year, RBC estimated that the share of income needed to cover homeownership costs in Toronto is still averaging over 60%. And so for many/most people, the new construction sector isn't a source of personal utility; it's a creator of things that aren't affordable.
Oh, you can't make money anymore? Good.
But here's a better kind of "good" to consider: as painful as the current conditions are for everyone in the industry — myself included — the market is being forced into a reset. Among many other things, municipalities are rethinking their development charges, construction costs are coming down, and nearly every developer seems to be pivoting their new-home business toward bona fide end users (as opposed to investors).
What I think this means is that when the market does return — and it, of course, will — it is highly likely that it will be rooted in sounder fundamentals. And this, I would say, is good.
Cover photo by Maarten van den Heuvel on Unsplash; pre-construction home sales chart from the Globe and Mail
Of course, the market took even longer to return to its 1989 peak. The average home price crossed $275,000 in 2002, which means it took 13 years in nominal dollars. However, $275k in 1989 is the equivalent of around $610k in today's dollars. So in real dollars, it actually took until 2011 for the market to return to its prior peak, which is some 22 years later!
I'm not arguing that the exact same thing will play out with this cycle. Who knows, Toronto is a different city. But I have suggested that 2028 could be the year where we're on the other side of this downturn. The average home price peaked, most recently, in 2022 at ~$1,194,600. Since then, it has come down by around 8.5% (as a broad average). If the market does turn positive in 2028, that'll be 6 years after the peak.
Only time will tell.
Chart from the Toronto Regional Real Estate Board; cover photo by Melvin Lai on Unsplash
If you look at the comment section of the article you'll find that a lot of people either couldn't care less or actually relish the fact that the real estate industry is shedding jobs. A lot of people responded with "good." This is not at all surprising (and not just because it's, you know, a comment section). Homes remain unaffordable in Canada.
In the first quarter of this year, RBC estimated that the share of income needed to cover homeownership costs in Toronto is still averaging over 60%. And so for many/most people, the new construction sector isn't a source of personal utility; it's a creator of things that aren't affordable.
Oh, you can't make money anymore? Good.
But here's a better kind of "good" to consider: as painful as the current conditions are for everyone in the industry — myself included — the market is being forced into a reset. Among many other things, municipalities are rethinking their development charges, construction costs are coming down, and nearly every developer seems to be pivoting their new-home business toward bona fide end users (as opposed to investors).
What I think this means is that when the market does return — and it, of course, will — it is highly likely that it will be rooted in sounder fundamentals. And this, I would say, is good.
Cover photo by Maarten van den Heuvel on Unsplash; pre-construction home sales chart from the Globe and Mail
Of course, the market took even longer to return to its 1989 peak. The average home price crossed $275,000 in 2002, which means it took 13 years in nominal dollars. However, $275k in 1989 is the equivalent of around $610k in today's dollars. So in real dollars, it actually took until 2011 for the market to return to its prior peak, which is some 22 years later!
I'm not arguing that the exact same thing will play out with this cycle. Who knows, Toronto is a different city. But I have suggested that 2028 could be the year where we're on the other side of this downturn. The average home price peaked, most recently, in 2022 at ~$1,194,600. Since then, it has come down by around 8.5% (as a broad average). If the market does turn positive in 2028, that'll be 6 years after the peak.
Only time will tell.
Chart from the Toronto Regional Real Estate Board; cover photo by Melvin Lai on Unsplash
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