Push-back? You bet. A bunch of realtors and condo-floggers were unhappy with me days ago when I pointed out the average SFH detached house in 416, the hotbed of Canadian real estate lust, has declined in value by 16.7% over the last five months.
But it’s true. At least as far as the official real estate board stats are concerned (yup, the ones they inflate monthly). What was just over $1 million in April was $843,138 last week. That’s a reduction of about $169,000, or darn near 17%. And while prices normally decline seasonally (making August a great time to buy), this year the plop’s been more than double the average.
Why? Simple. Ever since the feds punted CMHC insurance on houses over $1 million, sales have been quietly and steadily eroding, with prices now in the follow. Gone are the days when a high-income, cash-poor ditsy lawyer could waltz into Leaside and buy a boring $1.4 million faux baronial anorexic house with $70,0000 grand down on his gold card, adding the $48,200 in land transfer tax to the mortgage. Now that house takes $300,000 in cash.
In fact we have a million-dollar line in the sand, as far as most markets are concerned. On one side are the riff-raff, hipsters, minivan, kid-popping middle-class climbers, and on the other those who wonder where the buyers went, sitting on massive gobs of uncomfortably-illiquid net worth.
In the middle is the real estate cartel, deceiving as usual with no useful market analysis, plus broad statements like this: “Sales were up strongly for all major home types across the GTA through the first two weeks of August. During the first 14 days of August, the number of home sales grew at a faster pace year-over-year compared to the number of homes listed for sale. This means that competition between buyers increased relative to the same period last year, which explains the continuation of very strong average price growth in the GTA.”
See what I mean? Strong sales “for all major house types” and “competition between buyers” – it suggests anyone not jumping in immediately will be paying more. But the facts are buyers now, at least in a category where there are 2,800 listings in this one region, will be paying less. A helluva lot less.
Nor is this just a Toronto thing. Former realtor and housing watchdog Ross Kay has also seen this trend forming for some time. As of the middle of this month, he says, there was “a clear and measured change” in the market for houses which remain CMHC-insurable (below a mill) and those no longer eligible.
“While those sellers under $1,000,000 have increased their selling prices 4.91% since July,” he says, “when the homes over $1,000,000 are included in the average we recorded a 6.87% decrease.” Kay also claims that 75% of all houses listed on the MLS system nation-wide will end up selling for less than their listed prices.
So there ya go. A 17% drop in the average 416 detached house since April. And almost a 7% decline in national prices in the last 45 days. Seasonality plays a role, without a doubt, but if this trend continues unabated into the key autumn selling season, it is simply more evidence that peak house is behind us.
Now to Australia, where houses are sold by auction, and this anguished young man.
More than a week ago, as I dreamt of goats, I wrote about independent Aussi senator Nick Xenophon and his showboating campaign to create a Canadian-style Home Buyer’s Place down under. Here we call state-assisted retirement savings “RRSPs”, and (as you know), lusty young first-time virginal homebuyers can pluck up to $50,000 from their plans for a real estate down payment, on the condition they eventually pay it back. Sadly, a huge number do not – likely because they bought so much house with such bloated debt they have no money.
In Australia, such savings are called “superannuation” and Senator Nicky wants kids to be able to raid it the same way, because that country is also plagued with seminal horniness and houses people can’t afford. But, as I explained here, the HBP doesn’t work. All we have done is transfer $30 billion from savings and investments into real estate, allowing 2.5 million more sales, and helping jack prices to the point where we are the second-most-unaffordable country on the planet.
Suddenly (since my blog post) a movement of sane, mostly young people in the land of the billabong has erupted to stop Nicko, because they fear the plan would (as here) simply goose values more. They also suggest the senator, who owns eight investment properties may be working in his own naked self-interest. Imagine. Shocking, I tell you.
Well, here’s the petition, and I didn’t see anywhere that northern hosers are excluded from adding their voices. By the way, the young ‘roo warriors credit me with creating the HBP here in Canada. I did not. Too busy inventing trouble.