According to a recent Real Estate Trends report issued by Scotiabank, Canada’s housing market is “moving towards more balance, but there won’t be a bust like we’ve seen in the U.S. housing markets.” Yet, there’s little question that the heat has come off in a fairly significant way. Resale activity across Canada has “fallen for four consecutive months and is running about 15% below last summer’s historic peaks,” the report’s author, economist Adrienne Warren said. The average resale price of a Canadian home registered its first “inflation adjusted” quarterly decline in seven years.
New home construction is also experiencing change as residential building permits saw “sharp declines” and inventories of unsold new homes are trending higher.
Warren goes on to say, “Canada’s recent record of price appreciation, averaging an annualized 10% from 2002 to 2007, was unsustainable, and a return to more historical norms is a welcome development.” In explaining her confidence that the market is unlikely to see major declines like it did following the last two Canadian housing booms, Warren makes the following points.
- Home prices in Canada are not substantially overvalued
- There is little evidence of widespread speculative home buying that often accompanies the later stages of a housing boom
- Canada’s real estate market is not overbuilt
- Canadian households are not overleveraged
- Overall mortgage quality is still sound.
“From a regional perspective, the cooling in overall activity is most notable in many of Canada’s hottest urban housing markets in recent years, including Calgary and Edmonton. Both centres have officially moved into buyers’ territory as soaring prices weaken demand and fuel new listings. More generally, however, economic conditions continue to favour the resource-rich markets in the West over manufacturing-dominated centres in Central Canada hampered by a strong Canadian dollar and softening U.S. import demand. Regina and Saskatoon are currently in the strongest sellers’ position nationally, supported by good affordability, rising population inflows and tight supply.”
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Royal LePage Saskatoon Real Estate