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Canadian Real Estate Chart Book





Navigating a Sea of Opportunity

Canadian Real Estate Chart Book


The Pacifica Partners’ Canadian Real Estate Chart Book is a summary of Canadian home price trends versus both Canadian equities (TSX index) and home prices in major US cities. Charts for 12 month rates of change for home prices and “sales pair” volume in Vancouver, Calgary, Toronto, and Montreal are also included. Canadian home prices and sales volumes are sourced from the National Bank Teranet Home Price Index, while US home prices are sourced from the S&P Case Shiller Home Price Index. Please refer to homepriceindex.ca or Standard and Poors for the methodologies and definitions used in calculating these indices.

Our Canadian real estate outlook:

 

We remain bearish on Canadian real-estate as the incremental benefits arising from a low interest rate environment appear to be exhausted in most regions. Furthermore, Canadian consumers face a number of head winds related to the general economy and an over-leveraged personal balance sheet. Primary concerns impacting Canadian real estate include:
 
• High levels of Canadian personal debt
• Declining consumer confidence
• Decreasing GDP growth rates and forecasts
• Unemployment which, despite decreasing since peaking during the 2008-09 financial crisis, remains well above long term historic averages
• Inflation rates that are above the Bank of Canada’s long term target

 
Regions in which home price appreciation over the last decade have significantly exceeded household income growth or growth in regional GDP are most vulnerable for a sizeable price correction.
 

Summary:

 

The following charts are presented without a chart-by-chart interpretation. However, the following facts are observable:
 
• Without consideration of leverage, dividends, rental income, or differential taxation, Canadian real-estate out performed stocks by upwards of 50% from January 2000 to July 2011. However, over a longer observable period, real-estate returns have lagged returns by Canadian stocks. Notably, multi year periods of real-estate out performance have historically been followed by multi year periods of real estate under performance versus Canadian stocks.
 
• US real estate in most major markets have corrected downward from relative peaks versus major Canadian markets by approximately 75%. This correction is resulted from rising Canadian real estate prices, a weakening US dollar, and declining US real estate prices. We observe this level of spread in relative value between Canadian and US home prices difficult to justify based off of economic fundamentals.
 
• Calgary home prices have exhibited negative year over year price changes since mid 2008.
 
• Since mid 2010 Montreal, Vancouver, and Toronto have experienced increasing home prices on decreasing sales volume. As a result, we view these home price increases as having less integrity than price increases during periods of increasing sales volume.
 

Chart 1)
 
Medium term Canadian real-estate price performance as a multiple of Canadian equities from December 1999: Vancouver, Toronto, Calgary, Montreal, and TSX composite
 

Cross Border Real Estate Investing Canada
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Chart 2)
 
Long term Canadian real-estate price performance as a multiple of Canadian equities from December 1979: Vancouver, Toronto, Calgary, Montreal, and TSX composite

 

Cross Border Real Estate Investing Canada
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Chart 3)
 
Vancouver real estate versus major US markets. Vancouver, Phoenix, Los Angeles, San Diego, San Francisco, Miami, Chicago, Las Vegas, New York, Portland, Seattle

 

Cross Border Real Estate Investing Canada
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Chart 4)
 
Calgary real estate versus major US markets. Calgary, Phoenix, Los Angeles, San Diego, San Francisco, Miami, Chicago, Las Vegas, New York, Portland, Seattle

 

Cross Border Real Estate Investing Canada
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Chart 5)
 

Montreal real estate versus major US markets. Montreal, Phoenix, Los Angeles, San Diego, San Francisco, Miami, Chicago, Las Vegas, New York, Portland, Seattle

 

Cross Border Real Estate Investing Canada
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Chart 6)
 
Toronto real estate versus major US markets. Toronto, Phoenix, Los Angeles, San Diego, San Francisco, Miami, Chicago, Las Vegas, New York, Portland, Seattle

 

Cross Border Real Estate Investing Canada
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Chart 7)
 
Canadian national real estate 12 month home price and volume change

 

Cross Border Real Estate Investing Canada
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Chart 8)
 
Vancouver real estate 12 month home price and volume change

 

Cross Border Real Estate Investing Canada
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Chart 9)
 
Calgary real estate 12 month home price and volume change

 

Cross Border Real Estate Investing Canada
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Chart 10)
 
Montreal real estate 12 month home price and volume change

 

Cross Border Real Estate Investing Canada
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Chart 11)
 
Toronto real estate 12 month home price and volume change

 

Cross Border Real Estate Investing Canada
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Pacifica Partners – Capital Management
Navigating a Sea of Opportunity

Disclaimer:

This report is for information purposes only and is neither a solicitation for the purchase of securities nor an offer of securities. The information contained in this report has been compiled from sources we believe to be reliable, however, we make no guarantee, representation or warranty, expressed or implied, as to such information’s accuracy or completeness. All opinions and estimates contained in this report, whether or not our own, are based on assumptions we believe to be reasonable as of the date of the report and are subject to change without notice. Past performance is not indicative of future performance. Please note that, as at the date of this report, our firm may hold positions in some of the companies mentioned.

Copyright (C) 2011 Pacifica Partners Inc. All rights reserved.

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