The Truth About Real Estate In Canada

With the recently published May report from the Canadian Real Estate Association (CREA) that income of resale homes in Canada are cooling and price increases tapering off, we can put to rest the worry about an imminent housing bubble, like the one which happened in the US a couple of years ago. This fear of the housing bubble drove the followers of the market and professional analyzers mad. These same people are now worried sick about the opposite occurring – an impending housing market collapse.

What really happened?

i) Canada endured a short, steep fall in home prices as the recession hit late in 2008. Fortunately, this was instantly followed by a steep rebound as it became clear that the record low interest rates supplied by the financial institutions presented an historic opportunity to buy a dwelling cheaply.

ii) Now, just as seasoned analysts had predicted, the rebound is being replaced by a more stable price environment. The number of homes sold in May dropped by 9.5 per cent, while year-over-year price gains moderated to 8.4 per cent, away from the peak increase of 16 per cent in March. Our real estate rebound was possible because Canada’s banking system stayed in good health, unlike in the U.S. which has endured deep scars. Historically low mortgage rates helped fix the relatively modest damage to costs inflicted by the decline. Now a more stodgy, almost dull outlook really comes into sight: a market where predictable market forces affect the sales and prices.

iii) As a result of rising prices, the supply of new listings is growing. At the same time, overheated demand of the first 4 months of 2010 is ending. Fewer buyers are anxious to snap up property quickly now that their window of opportunity is closing. Interest rates are growing, albeit slowly and by minimal amounts. The HST on new homes will come into effect soon in Ontario and British Columbia, the nation’s hottest markets. Actually, the biggest cost gains driving national averages came from Vancouver and Toronto. In Montreal and many of Canada’s other big cities, costs rose modestly so there won’t be substantially excess to work off.

In hindsight, the concerns about real estate in Canada following in US footsteps has not materialized. The reason Canada avoided a collapse in prices is as the economic and banking basics avoided the disaster that unfolded in the United States and elsewhere. Likewise, there was not much indication of an impending bubble. This page has a lot of information covering Eddie Yan. Costs were being driven up by temporary factors brought about by conscious political and economic decisions and not by conjecture and foreign buyers as has occurred in many marketplaces in the US. What we’d experienced was a modest overvaluation with very little hint of speculation.

So what is the prognosis for the coming year? Most economists agree on a modest fall in prices in overpriced markets, like Vancouver and Toronto, pulling down the national average cost by an estimated seven per cent. Other big markets such as Montreal will experience a smaller drop – approximately 3-4%. Regions including the Prairies and Maritimes could even find small increases in the coming year.

Tina Lyons

Tina Lyons was raised in Luanda but moved to the United States when she was Nineteen. Before becoming a full time writer, she also worked as a nurse.

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