Canada's Housing Bubble

Jun 15, 2011 JULIEN RUSSELL BRUNET theglobeandmail.com

Sales of resale homes in Canada were basically flat in May, compared to April, falling by less than 1 per cent, though they gained on the year by 2.7 per cent.

Prices climbed 8.6 per cent from a year earlier, but the Canadian Real Estate Association said the national average of $376,817 was skewed by strong sales in “selected pricey” areas of Vancouver and broad price increases in Toronto, where supply is still tight given demand.

Remove Vancouver, CREA said, and the year-over-year price increase was 5.6 per cent. Take out Toronto as well, and it was 3.7 per cent.

“Quite simply, no other city in the country is seeing anything remotely close to what’s unfolding in Vancouver,” said Douglas Porter, deputy chief economist at BMO Nesbitt Burns.

“In fact, many large cities have posted price declines over the past year, notably Calgary, Edmonton and Halifax ... Among the other largest cities, only Toronto is showing anything close to overheating, and its 8.7-per-cent year-over-year price gain seems to fall well shy of bubble territory.”

He said the market appears to have enjoyed a healthy spring, despite poor weather and new mortgage rules.

“The Canadian housing market has seen some big ups and downs in recent years, making national sales activity so far this year look like something of a Goldilocks story by comparison - not too hot, not too cold,” said Gary Morse, the group’s president.

Of course, it doesn't look like Goldilocks was eating breakfast in Vancouver.