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Optimistic Housing Predictions Cheer Canadians

Written by Posted On Tuesday, 12 February 2002 00:00

With tales of recession and financial woe all around us, are you ready for some good news?

Canada Mortgage and Housing Corporation (CMHC), our national housing agency, made some firm, and largely encouraging, predictions last fall for real estate markets in 2002. Current construction activity indicates that these predictions will be exceeded..

"Housing Starts Jump 17.3 % in January" was the cheery headline of a recent CMHC media release. In this case, a decidedly un-Canadian winter coupled with a surge in new home demand late in 2001 are credited with this good news.

"January's annual rate of housing starts posted the highest level since May 1990 due in part to unusually mild weather in central Canada," said Philippe Le Goff, senior economist at CMHC's Market Analysis Centre.

"The building industry is responding to tight resale and rental markets in many metropolitan areas. Last month's rental starts were up favorably in Quebec, Ontario, Alberta, but, to a lesser extent, in British Columbia and Nova Scotia. Actual rental housing starts at 1,786 January were the highest since November 1993."

Ted Tsiakopoulos, an Ontario Market Analyst at CMHC is even more optimistic: "Although still early in 2002, evidence so far suggests that the worst of the US economic slowdown may be over. This combined with tight local resale markets, low rental vacancies, strong migration and affordable lending rates suggest Toronto housing starts should remain strong for the first part of this year."

This "roaring start" puts a positive spin on 2002 housing forecasts made by CMHC analysts at the end of 2001. Then, CMHC pundits predicted housing activity across Canada would be slightly below 2001 levels. Analysts saw new home construction tapering off in 2002, but still predicted healthy activity largely because of low interest rates and low inventories. The analysts warned that sales of existing homes may soften because of weak job creation.

Alberta was the housing "hot spot" last year, with Edmonton overshadowing Calgary. From 2000 to 2001, total MLS sales in Edmonton rose by about 12.1 per cent compared to 8.9 in Calgary. In 2002, CMHC experts predict Alberta and Edmonton will maintain these levels. Sales may dip slightly if mortgage rates start to rise or gains in employment slow. MLS prices are expected to increase at a rate slightly less than 2001's 4 per cent.

Among the provinces, only British Columbia and Ontario have higher housing prices than Alberta. The overall price differential between BC and Alberta is about $65,000, while between Ontario and Alberta it is about $45,000. High housing prices do not deter CMHC from predicting that in British Columbia "barring a longer than expected slowdown in the global economy, internal forces such as the impact of considerably lower tax rates as well as improving business and consumer confidence should help to propel economic growth in BC over the longer term."

Keep in mind that real estate markets are as localized as what is happening on one street, city block or neighbourhood. Yes, global, national and provincial economics will affect the value of your home to some degree, but not as much as how you and your neighbours react to your local economic and social needs. Be careful to keep local real estate issues in focus when you make buying or selling decisions.

In this environment of low interest rates, economic recovery and improved consumer optimism, the current real estate market may represent a strong buying opportunity for those timing a real estate purchase.

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PJ Wade

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