ROMA LUCIW
Globe and Mail Update
Canada's housing market is on fire, a sizzling pace of activity that has one economist warning of dangerous conditions that could see the current cycle come to an ugly end.
‘Just as U.S. housing is finally cooling down, there are signs that the Canadian housing market is actually heating up, potentially dangerously so,’ Douglas Porter, deputy chief economist for BMO Nesbitt Burns Inc., said in a report. ‘Canadian price increases for both new and existing homes have recently surged ahead of U.S. trends in the past few months, and seem to be gaining momentum.’
South of the border, the U.S. housing market has eased from record highs. Since sales peaked last summer, the pace of housing starts has begun to recede, price increases have moderated substantially, the inventory of unsold homes has mounted and buyer traffic has slowed to a crawl, Mr. Porter said.
However, recent Canadian data indicates little evidence of a slowdown. The average price of a residential home in Canada surged 12.9 per cent to a record $280,740 in April, according to sales tracked through Multiple Listing Service (MLS) by the Canadian Real Estate Association. That was the third consecutive monthly record, and the 12.9-per-cent jump was the biggest year-over-year increase since April, 2004. The trend was said to be countrywide, with average prices leaping to their highest monthly levels on record in almost every province.
Although higher Canadian interest rates and the run-up in home prices are starting to have an impact on prospective buyers, Mr. Porter believes more dramatic measures are needed to take the heat out of the market.
‘It took an extreme drop in affordability and the start of a U.S. recession to finally put out the Canadian housing sector fire in 1990, and it may take an equally dramatic event to stop this cycle,” he said. The longer the current boom lasts and the higher it climbs, the greater the risks of an ugly end to this housing cycle.’
The housing boom has fuelled explosive job growth in the construction sector and a large jump in household debt, Mr. Porter said. ‘While Canada may not have fully joined in the U.S. mortgage equity withdrawal spending spree of recent years, the steady slide in Canada's personal savings rate to near-zero suggests that the housing boom has at least indirectly unleashed sustained strength in consumer spending.’
Mr. Porter said the Canadian housing market is stronger than in the U.S. because short-term interest rate rises have been more modest in Canada during the last two years and long-term rates have stayed much more subdued.
When compared to the U.S., the housing boom took longer to get started in Canada and is much less of a spent force, Mr. Porter said. Lastly, employment growth in Canada has more than doubled the U.S. pace over the past five years, leaving more people with the financial means to buy a home.
‘To those in Central Canada, it may seem passing strange to talk about a housing boom, since conditions in Ontario and Quebec are far from frothy,’ Mr. Porter said. ‘But just because bubble-like activity is concentrated in only some regions — pretty much anything west of Lake Superior — doesn't make it any less real.’
http://www.theglobeandmail.com/servlet/story/RTGAM.20060530.whousingdanger0530/BNStory/Business/home
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Pramod Chopra
Senior Mortgage Consultant
Mortgage Alliance Company of Canada
Even though Canada outpaced US in terms of recent emloyment gain and growth figures , we must remember that almost 90 % of Canada's trade is with US. The housing slowdown of US is bound to percolate to Canada sooner than later.
House buyers will not lose if they buy a good marketable property in a easy to access area, but those who are buying on speculation or as a long term investment , be aware of the impending slowdown.
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Non illigitamus carborundum
And for all those who love to read more about home prices, here is a link to TD Bank's report on housing called "Bubble Watch". this report was presented to the audience from our offices by a TD bank's Business Manager.
http://www.td.com/economics/special/housing_0406.pdf
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Rajeev Narula, Broker, REALTOR®
ACE TEAM REALTY INC., Brokerage
10 Kingsbridge Garden Circle, Suite 704
(Opp Square One - HWY10/403)
Mississauga, ON L5R 3K6
Bus: 1-888-355-3155 Ext. 300
Fax: 1-888-443-3155
Email:
Web: http://www.RAJEEV.ca" rel="nofollow">LINK
Location: Canada-Glorious and Free
Posted on: 31-05-06 09:04:08
I wonder what our resident real estate gurus think about the ICI market? CAP rates are incredibly low right now, especially in the GTA. Which is good news for those wishing to dispose properties and not so for those in the market to invest.
ICI market has gone with it's own pace vis-a-vis residential market. I wonder if anybody has any insight into what the future holds for this market? Especially in light of the fact that the prime rate is going to drop in the fall.
BV
As interest rates go up to contain inflation, home prices will come down. Wait for the right time, make sure you save your downpayment deposit to use towards buying your place. Dont pay high premium values to properties as it is overvalued by atleast 10 to 15% which could save you almost 40k on a 400k house. I can write few pages arguing about it based on the fundamental global economic fiscal & monetary policies. As the supply of money is going to be less once the interest rates peak, eventually, it will slowly bring the housing market down.
Quote:
Originally posted by vic1791
As interest rates go up to contain inflation, home prices will come down. Wait for the right time, make sure you save your downpayment deposit to use towards buying your place. Dont pay high premium values to properties as it is overvalued by atleast 10 to 15% which could save you almost 40k on a 400k house. I can write few pages arguing about it based on the fundamental global economic fiscal & monetary policies. As the supply of money is going to be less once the interest rates peak, eventually, it will slowly bring the housing market down.
With the oil prices going up and taking its toll on inflation; interest rates will not rise as people will need to spend more to remain on the same level. The home prices will not 'come down' it rise will be became gradual not steep. According to some guru's It is now at 2.4% monthly down from 4% in the last 48 months for Mississauga. To suggest that it will became -2.4% in the next few yrs in not happening as majority of the buyers are self users and not investors or speculators as in 1989. Investment in Mississuga, Oakville and others good parts of GTA will sustain itself due to demand.:cheers:
