Canada's housing market has 'landed safely,' bank analyst says
By John Morrissy, Financial Post December 10, 2010
There was no bubble and there will be no bust in Canada's housing market, TD Economics said in a report Thursday.
The market has instead "landed safely," said economist Pascal Gauthier.
He said 2010 "was not what bubbles are made of. Similarly, under our forecast interest-rate profile, the next two years will not be what crashes are made of."
The market's stellar recovery through 2009 had many worried it had become overheated, as first-time buyers rushed to capitalize on rock-bottom mortgage rates and sales and prices soared.
But the race to get in before borrowing costs rose -- as they began to do by mid-2010 -- front-loaded the market, and sales eased into 2010. Listings also retreated, keeping the market in check and preventing a steep price drop, Gauthier said.
By the second half of this year, sales have begun to rebound, as mortgage rates subsequently eased. The higher borrowing costs expected by TD did not materialize, the result of global economic uncertainty and further monetary stimulus by the U.S. Federal Reserve.
The bank now expects those low rates and higher sales to carry into 2011, and it has revised up its annual sales forecast by eight per cent to 420,000 units. It also expects 2010 sales to be on target with the bank's original estimate of 454,000 units. In 2009, a total of 465,000 resale homes changed hands.
Meanwhile, Statistics Canada reported Thursday that prices for new homes in Ottawa-Gatineau edged up a minuscule 0.1 per cent in October, and 3.7 per cent over October of 2009.
Nationally, prices were up for the third straight month, mainly due to increases in Toronto.
The federal agency's New Housing Price Index rose 0.1 per cent during the month, following a 0.2 per cent increase in September.
The October gain was in line with economists' forecasts.
Year-over-year, new-home prices advanced 2.5 per cent in October, compared to a 2.7 per cent annual rate in September.
Statistics Canada said prices in Toronto were up 0.2 per cent, while Vancouver recorded a 0.1 per cent rise.
Prices were unchanged in nine of 21 census metropolitan areas tracked by the agency. Declines were recorded in Calgary (down 0.6 per cent), London, Ont. (down 0.3 per cent), Victoria (down 0.2 per cent) and Regina (down 0.1 per cent).
Despite the decline in October, Regina has the strongest year-over-year increase, at six per cent.