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Canadians ask "Is now a good time to buy?" and record
numbers continue to answer "yes" as they sign on the
dotted line for a new or resale home. The professional
response from real estate boards, real estate
professionals, governments and other real estate
experts remains cautiously optimistic as 2005 enters
its last marketplace for the year and projections for
2006 begin to emerge.
According to Canada Mortgage and Housing Corporation's
(CMHC) third quarter Housing Market Outlook,
residential construction will moderate in 2005, and
reach 218,900 units, a decrease of over 6 per cent
from 2004. In 2006, residential construction will
continue to ease dipping 8.5 per cent to 200,200
units.
"The unanticipated decrease in longer term mortgage
rates in the second quarter of this year will help
invigorate the housing market," said Bob Dugan, Chief
Economist at CMHC explaining why earlier 2005
projections were off. "Housing starts this year will
be slightly stronger than previously forecast, but
will not match last year's pace of over 233,000 units.
While economic conditions will continue to favour high
levels of new home construction, continued growth in
house prices coupled with expected modest increases in
mortgage rates will lead to a slight pull back in
housing starts this year and next."
CMHC analysts report that real estate markets will not
continue dramatic upward spirals, but will remain
strong:
* Existing home sales, based on Multiple Listing
Service (MLS) data, will remain near record levels in
2005, dipping slightly to 455,900 units. A rise in new
listings will help keep resales strong in 2006, but a
decline of almost 5 per cent is projected. The steady
price increases of the past three years and the
expected rise in mortgage rates will push mortgage
carrying costs higher and will cause housing demand to
ease gradually. Strong sales in 2005 will continue to
create sellers' market conditions, as a result, the
rate of increase in existing home prices will moderate
only slightly to 9 per cent. However, in 2006, the
resale home market is expected to become more balanced
causing price growth to slow to under 5 per cent.
* Renovation spending will continue to advance
strongly in 2006. Near record levels of sales of
existing homes, a strong job market and low borrowing
costs drive strong renovation spending, which will
reach C$40.7 billion in 2005, an increase of 10 per
cent over 2004. Experts expect an approximately 7 per
cent increase in 2006 to C$43.6 billion. The strength
in renovation spending will peak in British Columbia
and New Brunswick.
* Condominium sales in Canada's hottest market,
the Greater Toronto Area, continue to drive increased
sales, particularly in neighbourhoods outside
Toronto's city centre like Richmond Hill and
Mississauga. The Toronto Real Estate Board credits
condominiums with much of the increased sales activity
especially the 15 per cent increase in transactions in
North York where condos are the most popular type of
housing. A Toronto-based CMHC analyst explained this
pattern: "As the year-over-year growth in average
resale price has remained above the general rate of
inflation, we have seen increasing interest in more
affordable multiple family homes, such as town homes
and condominium units. These market segments will
continue to be a key driver of sales going forward."
In spite of record-breaking price increases in many
Canadian communities, not every property sells in a
storm of competing offers. There are always deals to
be had since buyers and sellers want very different
things. The more flexible buyers are about closing
date and their demands on sellers, the more receptive
sellers may be when it comes to sale price.
"Sales activity in June and July show we have a real
estate market that continues to keep pace with our
economy," said Real Estate Board of Greater Vancouver
President Georges Pahud. "While the realities of
supply and demand are influencing housing prices, it's
important to note that over 60 per cent of all sales
recorded in July were below the average prices across
all three residential property types. So while prices
are increasing, there are many properties priced
within affordable ranges."
All real estate statistics and forecasts must be
approached skeptically since real estate is a very
local commodity, not one sold on a homogenized
national, provincial or even city-wide basis. Some
reported price trends are derived from relatively low
numbers of sales. For every pundit's projection, there
are numerous local deviations, and a range of price
and location reactions.
Talk to local real estate professionals who
concentrate on the neighbourhoods you're considering
to get feedback and projections directly relevant to
the real estate you hold or expect to buy.
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