Era of big yearly price increases is over, Scotia Economics report says
Helen Morris
Sun
Housing-sector misery will continue for sometime in the U.S., while the Canadian market is showing signs of a cool-down, according to the Scotia Economics real estate trends report released Monday.
“We finally are beginning to see a slowdown in Canada, but we’re lagging the U.S. by about 18 months,” said Adrienne Warren, senior economist with Scotia Economics. “We don’t expect … the same type of downturn as in the U.S., primarily because the inventory situation is very different in Canada and the U.S.“
Risky lending practices, overbuilding and, more recently, a rise in foreclosures have seen near-record numbers of unsold homes clogging up the U.S. market and pushing down prices.
While the Canadian market is cooling, Warren said more conservative lending practices make a U.S.-style meltdown unlikely. Inventories — existing homes for sale plus newly finished unsold properties — have risen in Canada. The increase in inventory in Canada is manageable, Warren said.
“You would tend to expect after a long housing boom that there will be a little bit more supply coming onto the market.
“What we’re looking at now is more of a balanced market in Canada as opposed to the U.S.-style buyers market.” Price increases will be “relatively flat, rising in line with inflation.”
The report said home-building over the past decade has been outstripping the rise in new households.
“Part of this was manageable with a very strong economy, and people were buying homes at an even stronger rate than you might otherwise expect.” said Warren.
“We did see in this latest housing boom in Canada, a lot of the increase came from young people entering the housing market earlier than they had in past generations, often skipping the rental market entirely.”
A sustained economic downturn would likely see people delaying entering the housing market.
“With a softening economy, you might see a little bit of a delay of that trend or for how quickly new immigrants move from perhaps staying with a family member into the housing market themselves,” said Warren.
