Phil Soper, president of one of the largest real estate companies in Canada, says it must be tough to be a real estate reporter trying to find dramatic stories about the market, "when somebody like me says there's no bubble. This market will slow, but it will continue to expand."
Speaking to a gathering of Realtors in Toronto recently, Soper, president of Royal LePage Real Estate Services, said that although the country may be due for a real estate slowdown soon, and despite the fact that interest rates are edging up, there's nothing to indicate a real estate crash is looming.
Don Lawby, president of Century 21 Canada, said that, "It's the nature of our industry to be optimistic." But citing the strong economy, low interest rates and continued immigration, Lawby told the gathering, "The future looks very good to me." However, he added that there will be a "tightening" of the market "in many areas of Canada, except for Alberta and B.C."
It's pretty hard to find anyone with an extremely negative view of how the market is expected to perform during the next year or two.
Canada Mortgage and Housing Corp. issued its fourth quarter housing outlook last week, predicting there will be a record 476,000 MLS sales this year, dropping to 453,700 in 2006. "After posting their strongest increase in 16 years in 2003 (10.2 per cent), house price growth in 2007 will moderate to 4.9 per cent as existing home markets become more balanced," says CMHC.
Analysts have been warning for years that the condominium market in Canada's cities is becoming saturated, but Stephen Wong, chairman of Living Realty in Toronto, said that with the cost of detached homes becoming out of reach for many first-time buyers, he believes the condo market will remain strong. While the average house in Canada sold for $254,103 in September, a detached home in Toronto has a median price of more than $350,000. Forty per cent of new home sales in the Greater Toronto Area are condominiums.
Nationally, CMHC says housing starts will decline by 4.2 per cent from last year's 17-year high. It says starts will dip from 223,600 in 2005 to 207,200 in 2007.
"After a spectacular five-year run, Canada's housing boom finally appears to be cresting -- albeit at lofty heights," says Adrienne Warren, senior economist, Scotia Economics, in a recent construction report. It says that while multi-unit residential buildings continue to be built on par with last year's pace, "construction of single-detached homes has fallen more than eight per cent. Affordability is becoming a greater issue for many Canadians, especially first-time buyers who have been behind much of the strength in activity in recent years."
Although the new home market may be fading, the report says non-residential construction activity is ramping up and will pick up the slack. And the home renovation market is also showing no signs of slowing down, the report says.
"Record existing home sales this year and attractive financing costs suggest that home renovations will continue to expand at a brisk pace throughout 2006," says Scotia Economics. "Most home improvements and alterations are undertaken in the first three years following the purchase of a resale home. Renovation expenditures in Canada totalled a record $28 billion in 2004, roughly two-thirds the $43 billion spent on new residential construction."
The Canadian Institute of Mortgage Brokers and Lenders (CIMBL) predicts the Canadian mortgage market will expand by 10 per cent this year, and another 10 per cent in 2006. The organization says that during the last 15 years, residential mortgage credit has expanded at a rate of 6.4 per cent. The Canadian economy grew at a rate of 4.7 per cent during that time.
Asked about concerns that household debt is getting too high, Phil Soper said, "There has been a lot of talk that Canadian savings rates are dropping dramatically. But what is not stated is that with interest rates so low, people don't want to put their money" into low-interest savings vehicles. He said the situation is being misrepresented and that generally speaking, Canadians are handling their money wisely.
"Good old Canadian moderation is a good thing," he said, adding that many of the so-called 'exotic' mortgage products in the U.S. are not available in Canada.
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