24 march 2010
A Scotiabank global real estate trends report was released recently. According to it, the majority of Canadian regions will remain sellers’ markets for the first half of the year. The reasons are the following: strong demand and price hikes.
“I think the situation at spring market will be very active. The only decrease is expected in the second half of the year,” said Adrienne Warren, the Scotiabank economist, the author of the report.
“The confidence will come back, the job markets are on the way of stabilization,” she said.
According to Scotiabank’s information, about 510,000 home sales are expected this year. It is up 10% from 2009, but the numbers are still very small comparing to the 2007 record. Average prices are going to increase about 8% to reach the level of $345,000. Meanwhile, housing starts are expected to rise from the last year’s 149,000 to 190,000.
On the other hand, the recovery of the jobs market will take much more time: only a third of the 417,000 jobs lost in the 2008-2009 have been replaced. The jobless rate is still at 8.2%. It’ only 0.5% lower than in the last August.
Ms. Warren said the spring high activity will be motivated by a great number of buyers hoping to outpace the tighter lending mortgage rules and the introduction of the harmonized sales tax in Ontario and B.C.
“We’re starting to see more listings. There was a real lack of them in the previous year…now we move back to a better balanced situation,” she said.
According to Ms. Warren announcement, in the second half of the year the spring rush should give way to other activities, because of interest rates hikes and higher home prices, which influence affordability badly.
The Bank of Canada is expected to raise interest rates by 0.5%-1% in late spring or early summer, with the purpose of inflation reduce.
There are many Canadians with large mortgage debts across the country, that’s why higher rates can create real financial problems for some of the homeowners.
The constructions are expected to fade as well, as supply is going to increase and prices – fall, Ms. Warren said.
Canada’s recovery is far ahead of other developed countries around the world. The housing prices in the fourth quarter are up 19% comparing to the previous years. In the first two months of 2010 the sales were just a little lower than in 2009.
Ms. Warren believes that year-ago comparisons are too easy to pass, because of the great drop in prices and sales at the end of 2008, though they can still represent a serious change of the situation in a short period of time.
“We can’t see a lot of signs of speculation lately. I think it’s a tight market: there are more buyers than sellers. That’s why people have to overpay in this situation,” she said.
Another reason for the spring rush is milder temperature across the country.
Speaking about other countries, we should note that housing prices in the U.K., Japan, and the U.S. were still below year-earlier levels in the final quarter of 2009.