Category: National Real Estate News

This article appeared in The Province on December 7th, 2011 and was written by Garry Marr.

One of Canada’s leading real estate companies says the rising housing market may not appear to make much sense.

But appearances are deceiving and Re/Max says sales and aver-age prices will continue to climb in 2012 – and that Vancouver’s average house price will break through $800,000.

“Canadian residential real estate defied conventional logic and out-performed expectations in 2011,” the company said in its year-end report on the market.

Re/Max expects 2011 to finish with prices up seven per cent and the average home across the country selling for $363,000. The market won’t be as robust in 2012 but consumers can still expect another two per cent jump in prices, it added.

Sales for 2011 are forecast to climb by three per cent from a year earlier with 460,000 homes sold by year end. For 2012, expect less than a one per cent increase in activity with only an addition-al 4,500 sales.

“The Canadian housing market has demonstrated tremendous resilience in recent years but 2011 stands out,” Re/Max spokesman Michael Polzler said. “Residential real estate markets actually experienced an upswing in the volatile third and fourth quarter.”

For Greater Vancouver, the aver-age house price in 2011 will have climbed 16 per cent from 2010 to almost $790,000, Re/Max said.

Sales this year should rise to 32,700 units, up from 31,144 reported last year.

“Given strong underlying fundamentals, the Greater Vancouver residential real estate market is expected to bounce back in 2012,” Re/Max said.

“Sales are forecast to hold relatively steady at 33,000, while [the] average price is projected to climb a further four per cent to $820,000.”

Re/Max looked at 26 markets across the country and predicts 23 will show an increase in aver-age price for this year. Sales were up in 22 of those 26 markets. The company says 81 per cent of markets studied will see price increases in 2012.

Among the reasons cited for the Canadian housing market’s continued strength against the odds has been population growth which has gone up by 11 per cent since 2000.

“Population growth and immigration are major factors expected to prop-up housing demand and household formation in the coming years,” says the company.

Condominiums are expected to continue to garner a growing share of the housing market with investment and income-producing properties in high demand. Low vacancy rates are said to have driven those markets in 2011 and those conditions are expected to continue.

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This article appeared on Realty Biz News on November 28th, 2011 and was written by Travis J. Hampton.

Homes in Canada became a bit more affordable in the third quarter of 2011, according to a new report by RBC. Most parts of Canada saw a decrease in housing costs, with Vancouver being the one exception.

The index RBC uses calculates the affordability of housing at a given time. The lower the index, the more affordable homes are expected to be. In the third quarter of 2011, the amount of pre-tax household income a family would need to pay for home ownership went down across much of Canada. In Vancouver, however, home prices continued to be extremely high in wealthier neighborhoods.

The increase in affordability can be attributed to many factors, including the economic crisis in Europe, which has kept interest rates low. Experts at RBC expect prices to level off sometime next year, and those few places where prices increased (Toronto, Montreal, and Ottawa) will also start to see some stability in their home affordability.

“Housing affordability levels are quite good in most parts of Canada and will pose little threat to overall housing demand,” said Craig Wright, senior vice-president and chief economist.

The affordability index takes into account a number of factors beyond just the sticker price. It includes actual mortgage payments, utilities, and property taxes. It then formulates an affordability reading percentage, which indicates the amount of pre-tax monthly household it would take to cover those home ownership expenses. While Toronto and Montreal have an index of 52.1% and 40.9% respectively, Vancouver’s index is 90.6%.

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This article appeared on the Globe and Mail on November 24th, 2011 and was written by Michael Babad.

A new study of global housing markets by The Economist warns that markets in Canada and some other countries still appear “uncomfortably overvalued.” Indeed, the magazine calls it downright frothy in its latest update of house prices indicators.

Overall, the report shows prices falling in eight of 16 countries studied in terms of a price-to-income ratio, which measures affordability, and a price-to-rent ratio.

By averaging the two readings, The Economist warns that prices are overvalued by 25 per cent or more in Canada, Australia, Belgium, France, New Zealand, Britain, the Netherlands, Sweden and the ever-unfortunate Spain.

Here’s a really troubling bit: For Canada, Australia, Belgium and France, housing “looks more overvalued than it was in America at the peak of its bubble.”

The magazine notes that some economists dismiss its measures, citing the fact that lower interest rates – Canada is such an example – can justify fatter prices because they allow heftier mortgages. The magazine responds to that just as Bank of Canada Governor Mark Carney and others have: It will not always be thus, and rates will inevitably rise.

Here’s another warning, also along the lines of what we’ve been told for months now: “Australia, Britain, Canada, the Netherlands, New Zealand, Spain and Sweden all have even higher household-debt burdens in relation to income than America did at the peak of its bubble.”

Canadian housing markets have been cooling down, and many forecasters project a continued softening, though not a crash.

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This article came from CIBC Economics, was written on the 15th of November 2011 by Benjamin Tal.

House prices in Canada rose by 5.5% (year-over-year) in October following a 6.5% increase in September. This is the slowest pace of price appreciation since January.

Importantly, there is hardly any gap between the performance of the weighted price index and the un-weighted index, suggesting that the average price is not biased due to abnormal activity in large urban centres such as Toronto or Vancouver (Chart 1).

During the first ten months of the year sales were up by almost 2% vs. the same period last year, while new listings were hardly changed.

By province, the largest increase was in Saskatchewan, followed by Ontario (Chart 2). Note that the pace of house price acceleration in British Columbia is softening.

Mortgages outstanding are now rising by 7% (year-over-year), while the mortgage arrears rate has stabilized at close to 0.4%.

A glance at Chart 3 suggests that the market appears to be balanced from a supply/ demand perspective. But we also know that this balance can change very quickly.

The decelerating pace of increase in home valuation is a positive development. At this rate house prices will stop rising by the 2nd quarter of next year and that’s exactly what we need to see in order to achieve an orderly return to equilibrium.

Our assessment is that relative to rent, income and demographics, house prices in Canada are over-shooting. But the fact that prices are overvalued today does not necessarily mean that they will crash tomorrow. After all, a violent market correction needs a trigger such as the sub-prime crisis, which ignited the US real estate meltdown, or abnormally high interest rates as was the case during the 1991 property crash in Canada. That is not on the horizon this time around. The Bank of Canada is very clear about its intention to move slowly, with the first rate hike not expected before late 2012. As well, any objective assessment of the quality of the existing mortgage portfolio in Canada reveals a relatively balanced mortgage market with a small segment of marginal borrowers.

Accordingly, while we do not see house prices crashing, we do believe that the housing market in Canada will stagnate in the coming year or two. Further out, the most likely scenario is that the eventual increase in interest rates will lead to a modest decline in prices (probably in the magnitude of 10%). But given relatively modest rate hikes and the current balanced affordability position, the more significant adjustment will be in housing market fundamentals that are likely to catch up with prices in the coming years — paving the way for a healthier housing market later in the decade.

Indeed a flattening in house prices in the next year or so is a necessary condition for such a soft lending scenario. If the pace of house price increases accelerates during that period, then twelve months from now the likelihood of a violent price correction will be higher than it is now.

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