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As I have been pointing out for years: "the combined average sum price of a Vancouver, Calgary & Toronto condo is currently 52% (no typo) more expensive than a median priced Montreal SFD." |
The CMHC survey report confirms, Montreal buyers had less need to spend beyond their budget than the Vancouver and Toronto cohort.
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CMHC acknowledges via a closing reference to Robert Shiller's observation that "narrative economics"...
...sound prescient to describe what could be some influence happening in the local imaginary of homebuyers. The human brain has a natural draw toward stories whether they are factual or not... stories are powerful instruments to share information and reproduce narratives with economic impact.
The echo chamber stories we bolster our decisions with are well known, oft repeated and have created FOMO (fear of missing out) via the memes of "foreign buyer competition, money laundering, growing immigration, dearth of available land, prices always rise, prices won't drop much now, let renters pay the mortgage, rents are rising, housing is always in demand, government needs low interest rates, government provides financing subsidies, government will protect the construction employment boom" etal.
Executive Summary from CMHC June 2018
Guillaume Neault, Senior Manager, Analytics Housing Research
Housing Market Insight ID Number 68469
This report seeks to provide a deeper look into the results of the homebuyer motivation survey initially presented in the longer study Examining Escalating House Prices in Large Canadian Metropolitan Centres. The survey was developed as a response to gaining a better understanding of key drivers of rapid price growth in the markets of Vancouver and Toronto. Rapid price growth can lead to exuberance among market participants and manifests itself through excessive expectations of future price growth. Thus, CMHC designed and administered a questionnaire to 30,000 recent homebuyers in Vancouver, Toronto, and Montréal with main objective to survey buyers’ attitudes and perceptions about market drivers.
Summary results show:
∎ In both Vancouver and Toronto, 48% of homebuyers respectively spent more than they budgeted on their home purchase while only 24% of homebuyers in Montréal exceeded their budget.
∎ About 55% of buyers experienced a bidding war in Toronto and Vancouver, which is much larger than the 17% recorded in Montréal.
∎ 68% of respondents in Vancouver believe foreign investors have a lot of influence in driving up home prices while 48% of respondents in Toronto believe foreign investors have a lot of influence driving up home prices.
∎ Statistics Canada reported the share of non-resident ownership across all properties is 4.8% in Vancouver and 3.4% in Toronto.
∎ In Vancouver, the influence of investors is perceived to be stronger than conventional factors such as supply constraints and demand side factors.
The questionnaire was mailed to 30,000 households who purchased a home in Montréal, Toronto and Vancouver Census Metropolitan Areas (CMA) in 2017. One of the early hypotheses CMHC developed was that variation in price change should be somewhat proportional to the optimism of homebuyers in each CMA. CMHC identified Toronto and Vancouver because of its rapid price growth and identified Montréal as a control group because its price growth has been moderate.
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