Canadian Real Estate Forecast For 2012
Low interest rates and economic job growth have characterised the current Canadian property market, leading toward stabilisation and a greater ability to maintain slow economic growth throughout the economic crisis.
These unique attributes have made the Canadian property market increasingly attractive to overseas investors who have been Injecting money into the Canadian real estate market. This investor attention has created a slow rise in Canadian home prices, as opposed to other countries where the real estate industry has remained stagnant.
While the central bank has failed to hint whether they will increase the current base rate of 1%, people are still concerned by the cost of real estate versus affordability.
Mortgage rates with Ratesupermarket start at 2.75% which has enabled many first time homebuyers to jump on the real estate ladder and enjoy low monthly repayments. With no base rate changes since September 2010 it will be interesting to see how 2012 pans out.
Meanwhile, forecasts by The Canadian Real Estate Association (CREA) estimated that the national home sales for both 2012 and 2013 will remain in sync with the 10 year average for annual activity.
Property in the larger cities are typically more expensive and a closer look into key Canadian cities uncovers further issues.
Snapshot of Vancouver
- During 2005 to 2010, the compound annual growth rate in Greater Vancouver was set at 10% while the 20 year average was 6%.
- The average price of both single and multifamily homes during 2011 was $796,000, however, the CMHC predicts this average to rise during 2012 to $800,000.
- 48% of households own their homes in Vancouver compared to 68% nationally.
Trouble in Toronto - Condominium Market Subject to Excess Supply
Toronto has seen a 9% increase in condo real estate pricing in comparison to 2011. This means people will be increasingly opting to rent. This may sound like good news for property investors who dominate an estimated 25% of the market, however, as more units are listed for sale, price increases are slowing down. It now is only a matter of time before the market begins to adjust accordingly.
The housing marketing in Montreal saw home resells rise up to 6.9% during the fourth quarter of 2011. However, with a record 47,000 jobs having been cut, it is feared that both the housing demand and the conditions of the market may have negative impact.
The good news is: Montreal is Canada’s second metropolis and a strong office rebuild market has meant that it hasn’t been as severely affected by the economic crisis. According to a study conducted by the Altus Group, Montreal is one of Canada’s most predictable markets, offering high returns and more reasonable, stable prices.
While there has been an increase in prices throughout Vancouver, Toronto and Montreal, the Canadian property market is forecast to remain stable throughout the rest of the year.