Canadian real estate prices have been on a tear, but most of the gains are in condo apartments. Statistics Canada (Stat Can) release its Residential Property Price Index (RPPI). The result for Q3 2019, show Canada’s largest cities have seen a large movement in home prices recently. The large movement is due to condo apartments, which are growing over 3x faster than houses.
The Residential Property Price Index
The Residential Property Price Index (RPPI) is Stat Can’s new stab at measuring prices. It contains the inflation adjusted prices of new and resale homes. It’s also broken down into house or condo apartments. The RPPI includes six cities as of now – Montréal, Ottawa, Toronto, Calgary, Vancouver and Victoria. Since it’s an index and not a benchmark, it only tells you the direction of prices, and how much prices have changed. It unfortunately doesn’t tell you how much you should be paying for a house. Got it?
Canadian Real Estate Prices Are Up Less Than 1%
Real estate prices in Canada’s major cities aren’t moving a whole lot these days. The index of all housing types, increased 0.19% in Q3 2019. This brings prices up … well, 0.19% from a year before, and up 9.22% since the index started in Q1 2017. More than half of the index increase occurred in Q2 2019. Things moved just a touch above inflation for the rest of the time.
The Residential Property Price Index
An index of home prices in Canada’s largest six cities.
Source: Statistics Canada, Better Dwelling.
Canadian House Prices Are Up Over 5% Since 2017
Breaking that down by segment, we can see house prices are rising a lot slower than condo apartments. House prices increase 0.20% in Q3 2019, and are down 0.59% from the same quarter last year. From the start of the index in Q1 2017, prices are up 5.84% at the end of Q3 2019. These are large gains, just not the mind-blowing increases seen in condo apartments.
Canadian Condo Apartment Prices Are Up Over 18% Since 2017
To contrast, condo apartment prices are slowing down more recently – but made a huge climb. Condo apartment prices fell 0.18% in Q3 2019, but are up 2.11% from the same quarter last year. From the start of the index in Q1 2017, prices are up a surreal 18.89% at the end of Q3 2019. Once again, the increase for condo apartment prices is over 3x the size of houses.
Canada’s largest cities are seeing prices rise rapidly, but mostly in a single segment. Condo apartment prices are accelerating much faster than house prices. It’s almost like the concept of a ghetto tax, has been extended to all first-time home buyers.
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I’ll bite. What’s a ghetto tax? And is that an official term?
Ghetto tax = not a real tax, but the fact that poor people are charged more for the same items as rich people. It’s a well known phenomenon that because low income people can’t buy large quantities of things, they end up paying more.
Economists in other parts of the world call it a “poor tax.” Sometimes it’s charging higher interest rates to poor people, sometimes it’s selling hot dogs at 3x the price versus a rich neighborhood.
Rise of the poor tax was actually well documented in the US during the peak that preceded the Great Recession.
https://www.nytimes.com/2006/07/19/us/19poor.html?_r=1&ex=1153454400&en=014ade1889&oref=slogin
According to Wikipedia, a ghetto tax is the phenomenon of people with low incomes, particularly those living in poverty-stricken areas, paying higher prices for goods and services. The correlation between the ghetto tax and condo prices are that most first-time home buyers look to purchase a condo unit as the prices are lower than freehold. However, with rapidly increasing prices these become less affordable.
If it’s 18% for Canada’s largest cities, does that mean Vancouver is 40%, and the rest of the country was 0%?
“An index of home prices in Canada’s largest six cities.”
Last time I checked, Edmonton was several times larger than Victoria and actually IS one of Canada’s six largest cities, unlike Victoria. So, why wasn’t it included in this list? Maybe because it didn’t fit the narrative of rising prices and would have dramatically changed the trajectory of that chart?
Is Alberta still a part of Canada? I thought you guys left already.
It’s by sales volume I’m assuming. Victoria sales > Edmonton sales.
1000 -1200 dollars per sqft in Toronto is reasonable. If it wasn’t the agents buying them up to sell the assignments would risk their money. I mean most millennials will bounce back if shit goes south. The ones that don’t will move back into mom and dads house….
Is there just more demand for condos because they are “sexier” (views, new, shiny, core locations) than single family homes nowadays? Or is the price differential still at play here…
Where else can numbered corporations park their embezzled monies from blood diamonds and shady oil deals with Exxon-Mobil and other oil corporations?