Canadian home prices will reach a record high this year, but those expecting the sky-high house price increases of the past decade to continue will be disappointed
By Eric Lam, Financial Post
Canadian home prices will reach a record high this year, but those expecting the sky-high house price increases of the past decade to continue will be disappointed, a Scotiabank real estate expert said Tuesday.
“It’s time to reset price expectations for the Canadian housing market,” Adrienne Warren, senior economist with Scotiabank, said at a real estate conference in downtown Toronto. “This was an exceptional decade for pricing.”
Looking at the past 50 years, prices on average rose between 2% and 2.5% each decade. But prices rose an average of 5.2% between 2000 and 2009, she said, which led to the current elevated pricing conditions.
“Some of that reflects a very strong global economy, a commodity boom, unemployment rates falling, all very positive for housing,” Ms. Warren said.
She added that some very lean years between 1990 and 1999 meant there was an element of “catching up” going on over the last decade. Average prices increases between 1990 and 2009 was slightly less than 2%, she said.
As for this year, Ms. Warren still anticipates a strong spring sales market as consumers try to take advantage of rock-bottom interest rates before an expected rate hike by the Bank of Canada in the summer.
Overall, she forecasts 10% growth in sales volumes to 510,000 transactions for 2010, just shy of record levels in 2007. Average prices will increase about 8% to a record $345,000, and housing starts will rise to 190,000 units, she said.
Starting midway through 2010 the market will likely start to slow down, a trend that will carry through to 2011 and beyond, she said.
“Next year we’re looking for somewhat lower sales volumes, somewhat lower prices, and lower housing starts,” Ms. Warren said.
Further ahead, the mortgage market will steady as there will be fewer new products to attract consumers. Also, home ownership levels will peak and start to trend downward beyond 2020 as the 40-64 Baby Boomer set move into retirement homes or condos, she said.
————————————————————————————————————
Contact the Jeffrey Team for more information - 416-388-1960
————————————————————————————————————