by bill barber
The Real Estate Market In Canada Is Headed For A Cool Down
Article by Stefan Hyross
Depending on who you question, you will discover varying viewpoints on when and how the Canadian housing market will cool down from its recent meteoric climb. For example, TD Bank economist Pascal Gauthier plainly said in an interview with “Globe and Mail” this month that even though housing prices will continue to increase by 9 percent more than the 2009 values until the middle of 2011, they will then sharply fall — possibly down to 2.7 percent. However economist Sal Guatieri of BMO Capital Markets is somewhat hopeful, telling “The Montreal Gazette” that the overvaluation that caused the real estate bubble will just impact large cities, and should not bring about the sort of nationwide collapse anticipated in the US sector. But they both agree that the Canadian real estate market will need to cool off, but just when it will take place and how fast it will fall is the dispute still up for review.
Guatieri indicated that the cost for a family home should be “about four or five times income,” but today’s market in Toronto and Vancouver is closing in around $ 700,000, which averages 10 times the income of the home owner. This type of super-inflation is what prompted TD Bank to not associate recession recovery with real estate value, because their previous estimate of 1.6 percent gains in 2011 are already being compromised by the rise in the amount of new listings and new real estate starts this year, a sure sign of the start of the cooling direction. Areas such as Mississauga are currently experiencing an increase in new Mississauga condominiums but sales might begin to cool.
However TD did need to admit in their interview with “The Vancouver Sun” that their 2009 projections were short, because they did not anticipate “a move by buyers and sellers to pre-empt regulatory and interest-rate changes” that resulted in a sharp first quarter surge in housing sales. This growth, especially in Ontario and British Columbia, stems from the July target date in those regions for the HST tax to come into effect. In anticipation of this July deadline, the Bank of Canada has already announced its plans to raise their overnight target rate by July to counterbalance the current record setting low rate of 0.25 percent. Higher lending costs could act on cottage country with lower prices for areas like Wasaga Beach real estate and this could represent a chance for purchasers.
TD is of the opinion that real estate values are somewhat overvalued and that prices will proceed in a downward trend well into the next year as a result of family incomes that are trying to chase after the inflation rate. This is reinforced by a decline in MLS sales, that as well consists of Toronto MLS Listings, over the previous 6 months that the Canadian Real Estate Association has noticed. But everyone can see signs that the whole real estate market has been affected by the high percentage of boosted prices in the cities — how far this impact will extend is the main question.
“As a result of the stronger supply response, the market balance is now expected to be somewhat softer next year, consistent with market conditions more favourable to potential buyers and a mild depreciation in home values,” explained Gauthier. However Guatieri thinks the approaching cool down phase does not automatically mean that home values will indeed drop, but sees it as a gentle change after the recent surge. One fact both Guatieri and Gauthier do foresee on the horizon, though, is that irregardless of when it strikes, the cooling shift will not last forever, and within 3 years the average home price in Canada should find a balance and return to its fair market prices.
Stefan Hyross follows the real estate sector and writes about Mississauga condominiums and various market elements. For more information about Toronto MLS listings or to follow cottage regions like Wasaga Beach real estate please feel open to go to the website and explore.< ahref=”http://www.john-lavin.com/”>http://www.john-lavin.com/