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Canadians See Strong Housing Market Ahead

Written by Posted On Tuesday, 09 January 2001 00:00

Working title: Canadians promised strong housing market

The new century is up and running, and Canadians ask, "Where is it headed?" Year 2001 arrived on a wave of predictions and assurances from pundits across Canada—but with no guarantees.

Individual Canadians face the challenge of building solid personal certainty in an increasingly unpredictable economy.

For many Canadians, 2001 arouses concerns about security — personal and financial. Don and Alice Jones face an overwhelming 35% increase in property taxes and feel they can no longer afford to live in their Toronto home of twenty-five years. Seventy-year-old Janet Lee is one of many tenants who have been displaced by condominium conversions of apartment buildings. Stock market gyrations and indications of slowing economies add elements of uncertainty that have some Canadians fearing for their jobs.

But there are signs that 2001 will emerge as a good housing year in Canada.

  • Interest Rate Reductions Although the Big Banks dropped mortgage interest rates a bit last week, the Bank of Canada showed no sign of following the US federal government and reducing the prime rate, probably because bolstering our dollar takes priority. However, bank economists agree that Canadians can expect to see interest rates drop in the near future, particularly if US and Canadian economies continue to slow.

  • CMHC Predicts Strong Markets Canada Mortgage and Housing Corporation (CMHC), our federal housing agency, forecasts an active Toronto housing market, predicting that "robust new home activity should keep builders busy with a 7.2% increase in starts in 2001." CMHC experts also expect strong housing and mortgage markets in the large metropolitan centres of Ontario, Alberta and British Columbia and more moderate growth in other areas. CMHC researchers make specific 2001 predictions for Toronto, our largest real estate market:

    • Average single family home prices will rise to $250,000, up 3.3%

    • Over half of potential purchasers will be first-time buyers, and
    • Tight resale markets, encouraging a shift to new home construction, will lead to a new home sales record of 45,000 homes.

  • Personal Income Tax Cuts The capital gains cut (from 75% to 50%) handed out by the pre-election Liberal government was just the beginning, or so they promise. Following the adage, "It's not what you make, it's what you keep that counts," as Canadians pay less tax, they should have more to spend on putting a roof over their heads and keeping it there. (See my October 24, 2000 column Will Canadians Vote ‘Yes' on Billions in Tax Reductions? for background and watch future columns for details.)

  • Real Estate Sales Solid "With mortgage rates having declined in December and household incomes improving, [year-2000] MLS home sales are on target to match or possibly exceed last year's sales record," reported Pierre Beauchamp, Chief Executive Officer of the Canadian Real Estate Association . He went on to forecast that these factors, plus cuts in personal income tax, are setting the stage for a strong resale housing market and new home construction in 2001.

    Although Canadians can expect doom and gloom in the media, there is room for optimism, particularly for our housing markets. At very least, as long as CMHC, real estate associations like CREA and Canada's 66,000 Realtors promote a positive picture for real estate, buyers will be encouraged to get out and look for a new home and that keeps everything moving.

    My prediction? Canadian real estate will continue on its gradual upswing out of the nineties, but it will remain the same—hard to predict precisely, except in hindsight, and sensitive enough to change in the blink of an economic eye.

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    PJ Wade

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