Canadian Housing Market Outlook – June 2008

The average Canadian housing market and national MLS® home sales activity is projected to remain strong throughout 2008 and the national average house price is forecast to rise more than 5% in 2008. In relation to the record setting activity last year, the national average housing starts and MLS® home sale activity is easing slightly, and with the average price up 3.2% a balanced housing market has emerged.

It has become increasingly difficult to interpret data concerning the Canadian economy and its effect on the various housing markets across the country. Much of the confusion is contributed to overstating the connection between the housing markets in Canada and those of the United States. Due to the differences between Canadian and US mortgage lending practices, interest rates and economies, the Canadian markets remain strong based upon the actual housing starts and resale figures for 2008. This is in contrast to the volatile real estate markets in many parts of the United States evidenced by the rise in mortgage defaults and delinquencies. The housing recession in the United States is expected to continue through 2008 with record high inventory levels and housing start activity and prices on the decline.

It is projected that Canada’s economy will outperform the US economy throughout 2008, in particular due to Canada’s natural resource sectors in Newfoundland and Labrador and Saskatchewan where record-level activity is most prevalent. In addition, Canadian after-tax income growth, short-term interest rate cuts by The Bank of Canada and strong employment and new job creation is supporting consumer confidence and housing demand across the country.

For our clients relocating within Canada, the opportunity to sell a home remains positive in the majority of urban centers, although the previously active Alberta markets have cooled considerably and the average house price in both Edmonton and Calgary has declined from the same time last year. On the average, considering the imminent transition from a “sellers market” to a balanced market, the onus remains on a thorough appraisal review to ensure price projections are inline with expectations for the particular location and competing properties are properly assessed. In areas where sales are showing a greater than average decline, specific marketing incentives are encouraged to reduce the potential of housing inventories.

For the potential purchaser of a Canadian home, a healthy market in equilibrium means acceptable selection of available properties with average prices on the trend upward. A prepurchase appraisal is recommended in most instances, particularly those few markets showing evidence of price declines.

Housing Market Highlights and Statistics:

• In Regina, the average price for a single-detached home is $366,000 as compared to $305,000 Spring 2007 and is projected to be $403,000 by this time next year;


• In the Greater Toronto area, housing starts in the first four months of 2008 were up 47% compared to the same time last year. Condominium starts are nearly three times the levels as compared to last year;


• The National Average house price increased to $317,619 April 2008 from $305,499 April 2007;


• The Bank of Canada has continued to lower its overnight lending rate, currently at 3.0%, although concerns over deteriorating financial and economic conditions in the United States and their potential to spill over into Canada may promote further monetary stimulus;


• The average house price in Calgary April 2008 fell to $414,006 from $420,807 April 2007;


• The average house price in Newfoundland & Labrador rose to $167,021 April 2008 from $142,497 a year earlier;


• Record high employment levels in Canada continue to help support consumer confidence and strong demand in the housing market; 20,600 new full-time jobs were created.