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Why Canadian homes are 10% cheaper...

20 April 2016
LINDSAY WRIGHT

Why Canadian homes are 10% cheaper for the Chinese to buy than five years ago

Canadian house prices climbed 27 per cent over the five years from February, 2011, to February, 2016, according to the Teranet-National Bank Composite House Price index. But many foreign buyers are seeing price declines, after currency conversion (see chart below).

The currencies of China, the United States and Switzerland have gained so much against the Canadian dollar that they have outrun the increase in Canadian house prices. As a result, the citizens of these countries can buy at a lower price than in 2011: For the Chinese and Americans, it is nearly 10 per cent less; for the Swiss, it is 5 per cent less.

In most other countries, currencies rose less than Canadian house prices. Some, like the British pound, came up just a bit short – leaving a small price increase of 2.6 per cent. Others were further behind.

Much of the appreciation in the Chinese, U.S. and Swiss currencies was owing to a tumble in the loonie, brought on by the Bank of Canada easing monetary policy in response to the waning commodity boom. There were also fears the housing market was going to crash.

Although the decline in the loonie hasn’t boosted Canadian exports a great deal yet, it may have played a role in propping up the Canadian real estate market. There is considerable anecdotal evidence that Chinese buyers have been active in Toronto and Vancouver, both of which are seeing house prices go up.

In the five years to February, 2016, Vancouver house prices rose 36.2 per cent while Toronto house prices went up by 43.1 per cent. The increases are roughly in line with the upward trend in the strong currencies, so house prices in these cities are now more or less unchanged for buyers in strong-currency countries.

Ask me how we actively market our listings here at Re/Max Hallmark Wright Group in 36 languages, 45 currencies and 134 countries around the globe.