Often when Canada, China and house prices are mentioned together, two words follow: foreign investment.
Instead, BMO senior economist Sal Guatieri looks at another angle in a recent note sent to clients, putting prices in Canada’s hottest real estate locales in a broader context and highlighting one similarity between the Canadian and Chinese housing markets.
“After sinking last year, China’s house prices have turned sharply higher this year,” writes Guatieri, citing 7.4 per cent year-over-year price gains across the nation’s markets.
“However, the market is highly bifurcated,” he adds. Guatieri notes the divergence between top markets such as Shenzhen, where last month he says prices were up a blistering 57 per cent compared to March 2015, and “many other places saddled with a glut of unsold properties” which are seeing prices drop.
“Like many countries (Canada, Australia, Denmark, New Zealand), home prices are rising the fastest in a few major ‘gateway’ cities that act as powerful magnets for people and money, while prices elsewhere remain on low simmer, running alongside growth in local income,” writes Guatieri.
The Canadian Real Estate Association recently did the math showing how this trend plays out in Canada’s housing market.
If you cut Ontario and British Columbia — which between them claim six of the fastest-appreciating markets in the country, says RE/MAX — from national calculations, the average price of a Canadian home last month falls year-over-year by 1 per cent, the association says.
With those provinces included, the average price was up 15.7 per cent.
“The national average price continues to be pulled upward by sales activity in Greater Vancouver and Greater Toronto, which are among Canada’s tightest, most active and expensive housing markets,” CREA noted earlier this month.
Although Shenzhen’s 12-month price increases may leave Toronto and Vancouver in the dust, it appears at least one shared factor is spurring demand on both sides of the Pacific.
“After sinking last year, China’s house prices have turned sharply higher this year (7.4 per cent year-over-year to March) amid lower mortgage rates…” writes Guatieri.
Chart: BMO Economics