The Secret To Real Estate In Canada

With the recently published May report from the Canadian Real Estate Association (CREA) that income of resale homes in Canada are cooling and price increases tapering off, we can put to rest the worry about an imminent housing bubble, similar to the one that happened in the US a couple of years back. This fear of the housing bubble drove the followers of the marketplace and professional analysts mad. These same people are now worried sick about the opposite happening – an impending housing market fall.

What actually happened?

i) Canada endured a short, steep drop in house prices as the recession hit late in 2008. As luck would have it, this was promptly followed by a steep rebound as it became obvious that the record low interest rates supplied by the financial institutions presented an historical chance to get a house cheaply.

ii) Now, just as experienced analysts had predicted, the rebound is being replaced by a more stable price environment. The number of homes sold in May fell by 9.5 per cent, while year-over-year price gains moderated to 8.4 per cent, off from the peak gain of 16 per cent in March. Our real estate rebound was possible because Canada’s banking system remained in good health, unlike in the U.S. which has suffered heavy scars. Historically low mortgage rates helped fix the relatively modest damage to costs inflicted by the decline. Now a more stodgy, almost dull prognosis actually comes into sight: a market where predictable market forces have an effect on the sales and prices.

iii) As an effect of rising prices, the supply of new listings is growing. At the same time, overheated demand of the first 4 months of 2010 is finishing. Fewer buyers are anxious to snap up property quickly now that their window of opportunity is closing. Interest rates are increasing, albeit slowly and by minimal amounts. The HST on new homes will come into effect soon in Ontario and British Columbia, the nation’s hottest markets. Actually, the biggest price gains driving national averages came from Vancouver and Toronto. In Montreal and many of Canada’s other large cities, prices rose modestly so there won’t be much surplus to work off.

In retrospect, the concerns about real estate in Canada following in US footsteps hasn’t materialized. The reason Canada averted a fall in prices is because the economic and banking fundamentals avoided the disaster that unfolded in the United States and elsewhere. Likewise, there was not much indication of an impending bubble. Go to this website now to learn more about Eddie Yan. Prices were being driven up by temporary factors brought about by conscious political and economical choices and not by conjecture and foreign buyers as has occurred in many markets in the US. What we’d experienced was a modest overvaluation with hardly any sign of conjecture.

So what is the outlook for the coming year? Most economists agree on a small drop in costs in overpriced markets, like Vancouver and Toronto, pulling down the national average cost by an estimated seven per cent. Other big markets including Montreal will experience a smaller drop – about 3-4%. Areas including the Prairies and Maritimes could even find little gains in the forthcoming year.


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