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Rosy '04 Follows Record-Breaking '03

Written by Posted On Tuesday, 17 February 2004 00:00

The Canadian Real Estate Association (CREA) recently announced that Multiple Listing Service® (MLS®) sales for resale housing set new records in 2003, surpassing by 4.2 percent previous highs set in 2002.

  • Over 400,000 existing homes were traded at a value of C$91.0 billion (an increase of 14.3 percent compared to 2002) with records set in Alberta, Ontario, Quebec, New Brunswick and Newfoundland during 2003.

  • New listings reached their highest level since 1996.

  • Average home prices shattered all previous annual records in all provinces. In the greatest annual increase since 1989, the national MLS® residential average price exceeded C$200,000 for the first time in history -- at C$206,393 there was an increase of almost 10 percent over the previous record set in 2002.

    What will 2004 hold for Canadians?

    "Recent job growth and low interest rates will keep housing activity strong, but we cannot guarantee that annual sales will set another record this year," said Pierre Beauchamp, CREA's Chief Executive Officer. "Higher prices, a further increase in new listings and more balanced market conditions may result in some buyers taking longer to make a purchase decision and cause activity to edge back from this year's record."

    Resale housing activity is expected to surpass 2002 levels even with a small decline in 2004. The national average MLS® is forecast to increase between three and five percent.

    According to the 23rd Annual Watson Wyatt Survey of Economic Expectations, 55 leading Canadian economists believe Canada's economy will continue its recovery and maintain "moderate growth and stability" in 2004 and beyond. Watson Wyatt is a global consulting firm specializing in human capital and financial management with offices in five Canadian cities.

    "The survey results reaffirm that the Canadian economy is on course for prosperity, as experts anticipate an improvement in economic indicators almost all across the board," said John Gilfoyle, National Practice Director, Investment Consulting at Watson Wyatt. "Unlike last year when the optimistic stance was somewhat offset by expectations of declining productivity and living standards, the picture this year is extremely positive."

    Key survey findings include:

  • The Canadian Gross Domestic Product (GDP) is expected to grow at a rate of 3.0 percent in 2004, only down from 3.1 percent predicted last year.

  • A low inflation forecast of 1.8 percent for the current year and 2.1 percent for the long-term -- down significantly from last year's forecasts of 2.5 percent for both. This contributes to the "rosy outlook," signaling confidence in the Bank of Canada's monetary policies, as well as continued economic stability.

  • The Canadian dollar is also expected to remain strong. Forecasts call for the dollar to stabilize at current levels of $0.78 U.S. for the next five years, then to increase to just over $0.80 U.S. over the long-term.

  • Canadian labour productivity is expected to hit 2 percent for the long term, up from 1.7 percent in the 2003 survey. This optimism is critical to Canada's future living standards. An improvement in long-term productivity is likely to help offset wide-scale labour shortages anticipated by 2010. Additionally, respondents see the unemployment rate decreasing from 7.4 percent in 2004 to 6.8 percent for the long term.

    Economists are not quite as optimistic for housing starts which are projected to reach 200,000 for 2004, down from an actual number of 218,000 in 2003. Predictions for 2005-2008 call for a decline to 185,000 starts per year with a drop to 175,000 for 2009-2018.

    Let's hope the "rosy outlook" for the economy extends to real estate in all corners of Canada.

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