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The Canadian Real Estate Market Could End With a Whimper



We will take a look at canadian real estate in the following article. It is a good place to start if you are new to the subject. There is a lot more information available for those that want to make a more detailed study.



The Canadian Real Estate Market Could End With a Whimper

By Stefan Hyross

Contingent on who you question, you will discover different viewpoints on when and how the Canadian real estate market will cool down from its latest meteoric climb. For instance, TD Bank economist Pascal Gauthier bluntly said in an discussion with “Globe and Mail” this month that although real estate prices will carry on increasing by 9 percent more than the 2009 values until the middle of 2011, they will then sharply drop — potentially as low as 2.7 percent. However a nationwide real estate meltdown is not inevitable, counters BMO Capital Markets’ economist Sal Guatieri, who points out to “The Montreal Gazette” that when the real estate bubble finally pops, it should only disturb major cities. But they both concede that the Canadian real estate sector will need to cool down, but just how soon it will happen and how quickly it will drop is the question still up for debate.

As Guatieri draws attention to, today’s values for average houses in Vancouver or Toronto — around $700,000 — is coming close to 10 times the homeowner’s income, but that in a normal market “a more normal price is about four or five times income”. This type of hyper-inflation is what encouraged TD Bank to not equate economic recovery with housing value, because their previous estimate of 1.6 percent gains in 2011 are already being undermined by the increase in the number of new listings and new real estate starts this year, a sure indication of the start of the cooling direction. places such as Mississauga are still seeing an escalation in new Mississauga condominiums however sales might start to cool.

But TD did need to acknowledge in their interview with “The Vancouver Sun” that their 2009 prognosis were low, because they did not anticipate “a move by buyers and sellers to pre-empt regulatory and interest-rate changes” that caused a sharp first quarter rise in housing sales. The impending harmonized sales tax scheduled to come online in July in Ontario and British Columbia definitely affected markets in those provinces. In expectation of this July time limit, the Bank of Canada has now announced its plans to lift their overnight target rate by July to offset the current record setting low rate of 0.25 percent.The hardest affected real estate sectors might be cottage regions, similar to Wasaga Beach real estate, as property owners may flood the market with properties in advance the changes.

As household incomes catch up with the level of inflation — an astounding 8 percent over the last 8 years — TD forecasts that overvalued real estate values will carry on falling from 15 to 10 percent by the end of next year. This is reinforced by a decline in MLS sales, that as well includes Toronto MLS listings, over the last 6 months that the Canadian Real Estate Association has noticed. The sole debate that is on the table is what affect the inflated prices will have on the real estate market as a whole in the short term and going forward.

Gauthier describes his forecasts are a result of the “stronger supply response,” and that the “market balance is now expected to be somewhat softer next year, consistent with market conditions more favourable to potential buyers and a mild depreciation in home values”. But Guatieri believes the approaching cool down phase does not automatically signify that home prices will indeed fall, however sees it as a gentle adjustment following the recent surge. One thing both Guatieri and Gauthier do foresee in the future, though, is that regardless of when it strikes, the cooling trend will not last for good, and within 3 years the average real estate price in the country should come into equilibrium and return to its fair market value.

About the Author: Stefan Hyross researches the residential housing sector and writes regarding Mississauga condominiums and other market segments. For further details about Toronto MLS listings or to follow cottage regions such as Wasaga Beach real estate please feel open to go to the website and explore.


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