– This is the script of CNBC's news report for China's CCTV on July 18, Tuesday.
Summer is usually the time when we witness active property, but interestingly, Canadian property prices which have been soaring for decades, are experiencing a drop in June.
Data retrieved from the Canadian Real Estate Association show that sales were down 11.4% compared with June last year. The total number of homes sold nationally fell 6.7% in June, when compared to May. Comparing to the highest sales transactions in March, it went down further, by 14.1%. As such, the housing sales in June saw a consecutive three-month dip, the largest monthly decline since 2010.
We know that for the past 20 years, housing prices in Canada have been climbing rapidly. As seen from the charts. ever since the 90s, Canada's property prices have been heading north. Even the 2008 Financial crisis had very minimal impact to it. The decline period that it experienced was also far shorter than America's and from 2009 to the first half of this year, Canada's housing prices have increased very rapidly.
The Canada government has expressed concerns over the booming of property prices. On one hand, locals are increasingly unhappy with the soaring property prices. On the other hand, markets are frenzied about the imminent burst of the housing bubble. With regards to these, the Canadian government is adopting a two-pronged approach.
Firstly, the government has tightened its control on housing policies. In cities like Vancouver and Toronto, which have been experiencing persistently high property prices, the measure on increasing foreign' buyers tax has allowed the housing market to cool down. Furthermore, Vancouver and Toronto's markets have also affected Canada's other markets. Some analysts have also said that the Canada government is very likely to introduce policies to control housing prices which has caused many buyers to suspend their plans to buy houses, in wait of how specific future housing policy may change the situation.
Another contributing factor to the cooling is the tightening of Canadian's monetary policy. The RBC was the first major central bank to follow after Fed's announcement of interest rate hikes. Not long ago, it raised its key interest rates by 25 basis points,
which saw interest rates jumped from 0.5% to 0.75%. This is also its first rate hike since 2010. Some analysts have expressed that the soaring prices of property in Canada may be partly fueled by the very low interest rates. As Canada enters the rate hike cycle, we might see more cooling of property prices. Other than imposing housing regulations and tightening monetary policies, locals are urging the government strengthen affordable housing schemes.
[ANTHONY COUSE, CEO, APAC, JLL] "I think the governments have to look at curbing speculators and affordable housing as separate matters. The curbing is something that they feel necessary to do to prevent that. But more important in terms of long term sustainability of a market of a residential market, it's essential they provide affordable housing to the people."
We will continue to keep a lookout and provide updates on Canadian property price trends. Brought to you by Qian Chen from CNBC Asia's Headquarters.