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Pent-up demand, population growth, tight inventory levels, and the longest economic expansion since World War II collectively fueled one of the best decades on record for residential real estate in Canada, according to a report released today.

Re/Max Decade in Review 1997 - 2007 found that major housing centres across the country experienced strong consecutive growth between 1997 and 2007. Average price spiraled upward while unit sales climbed in tandem as more and more Canadians bought into homeownership. Nationally, average price almost doubled in the 10-year period, rising from $154,606 in 1997 to $307,265 in 2007, for a 7.1% annually compounded rate of return.

Home sales across the country increased just over 57% from 331,092 units in 1997 to more than half a million sales last year. Edmonton led the country in terms of percentage increase in average price. The city saw a 203% upswing in housing values - or an 11.7% increase annually - with average price rising from $111,587 a decade ago to $338,636 in 2007. Prince Edward Island experienced the highest percentage increase in unit sales, with the number of homes sold up 119% in the 10-year period.

“Immigration and in-migration have played a serious role in jumpstarting residential real estate markets, particularly in British Columbia, Alberta, and to some extent, Saskatchewan over the past decade,” says Elton Ash.

“At first, there was an influx of American buyers, especially in Canada’s coastal regions and recreational hot spots, as our southern neighbours took advantage of the almighty US greenback. Then the European and Middle Eastern purchasers flooded the market, buying up real estate considered ‘cheap’ by international standards. In recent years, there have been a growing number of purchasers from Mainland China. From a global perspective, there’s no question that Canadian real estate brings good value to the table.”

Percentage increases in home sales varied across the country, with Prince Edward Island experiencing the greatest upswing over the past decade. Most markets (12 of the 19 surveyed) reported increases between 40% and 60%. Average price has also seen substantial escalation over the 10-year period, with posted gains ranging from a low of 54.4% in London-St.Thomas to a high of 203% in Edmonton.

In 2006, homeownership rates in the country were the highest on record at 68.4%. Population growth has contributed to heated market conditions - especially in Calgary (+31.4%), Edmonton (+20%), Toronto (+20 per cent), and Vancouver (+15%) where percentage increases have hovered in the double-digit range. Overall, Canada’s population rose to almost 33 million in the 2006 census, up approximately 10% from 1996 figures.

“The non-cyclical nature of the decade comes as some surprise,” says Michael Polzler. “Never before have we seen such a continuous run up in Canadian real estate. Clearly, strength in all markets has been directly linked to solid growth in local, provincial and national economies. Low interest rates, job security, and consumer confidence have all served to further bolster home-buying activity across the nation.”

Robust economic performance in Western Canada has also drawn job seekers from across the country, looking to capitalize on employment opportunities.
   
As demand for housing increased across the country, the supply of homes listed for sale began to contract. Multiple offers were commonplace in many areas, some with sales-to-listings ratios as tight as 80% to 90%. Nationally, 1997 marked the first year since 1988 that the sales-to-listings ratio hit 50%. The sales-to-listings ratio would remain above 60% per cent from 2001 onward - rising to as high as 68% in 2002.

The decade was not without its obstacles - the high-tech meltdown, a US recession, 9/11, SARS, Mad Cow, a blackout that affected the entire Northeastern seaboard, natural disasters such as ice storms, hurricanes, and forest fires and more recently, the credit crunch south of the border. Given the continuation of sound economic fundamentals, it’s expected that residential real estate markets across the country will continue to experience healthy activity, albeit at a more moderate pace.

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Reuters

TORONTO — Real estate markets across Canada posted solid gains over the past decade, and the economic fundamentals remain in place for continued but more moderate growth, real estate broker Re/Max said Thursday.

Between 1997 and 2007, average home prices in Canada almost doubled, to $307,265 in 2007 from $154,606 in 1997, for a 7.1% annually compounded rate of return, they said.

The number of homes sold nationally rose over 57% to more than 500,000 last year from 331,092 in 1997.

“Never before have we seen such a continuous run up in Canadian real estate,” Michael Polzler, an executive vice-president said in a statement.

Low interest rates, a robust job market, and strong consumer confidence were all credited as drivers. Immigration and domestic migration to tap Western Canada’s booming economy also helped lift demand, the report said.

Real estate considered cheap by international standards attracted droves of U.S., European, Middle Eastern and Chinese buyers to the Canadian market over the past decade, according to the study.

The booming energy sector in Western Canada drew job seekers from across the country to that region, helping the housing market lead the way in terms of growth.

“Given the continuation of sound economic fundamentals, it’s expected that residential real estate markets across the country will continue to experience healthy activity, albeit at a more moderate pace,” the report said.

Its 2008 housing outlook, released in the fall, said it expected the domestic market to stay strong, but the the red-hot growth seen in 2007 would likely cool some, partly due to the economic slump south of the border.

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New Listings, Slower Sales Bring More Balance to Canadian Real Estate Market

By Sean Mckibbon

As existing home sales slipped in January, the Canadian Real Estate Association found itself touting a record of a different sort — that the month was the most balanced between buyers and sellers in seven years.

BMO Economist Doug Porter noted in a commentary that resale activity slipped in the month 0.4% and was down 8% against the year ago period.

“That’s a massive turnaround from last year’s 7.6% rise in overall sales,” he wrote. “The lousy weather may have played a role in restraining sales last month, although it’s not as if January is typically a treat on that front.”

Canadian Real Estate Association economist Gregory Klump adopted a more moderate take on the figures saying that his organization expected some softening in sales in 2008, but still expects overall sales for the year to come second only to 2007.

“We are forecasting an increase in new listings and sales to gradually ease back, that said we are forecasting the second best year on record ever, so sales will certainly remain strong,” said Klump.

The sales-to-new listings ratio in January fell to 55.9, the lowest level since January 2001 when the ratio was at 53.8. CMHC considers a ratio of 30-50 a “balanced market.” Klump said market tightness peaked in 2002 and has been decreasing steadily.

“We still anticipate negotiations will mildly favour a seller,” he said, but added that with more product to choose from buyers will take more time purchasing.

He said Newfoundland and Saskatchewan saw markets tighten, but that they were the exceptions.

While average price levels were up in the month over the previous January, Porter noted the 8.6% increases was “somewhat skewed by the mammoth 69% and 37% jumps in Regina and Saskatoon (respectively), although at least 12 cities reported a double digit gains…”

Porter and Klump both saidAlberta’s previously red-hot markets had cooled.

According to Porter, the Alberta markets are acting as a drag on the overall sales figures as Calgary sales fell 30.9% and Edmonton sales dropped 21.0%.

“With the further dip in January, Canadian home sales are now well-below year-ago levels, adding further evidence that the great boom is winding down. Sagging affordability appears to have finally dug into activity, most notably in Alberta. Still, prices across most of the country remain well above year-ago levels and most markets are well balanced, so we’re not looking at serious strains in the housing market. Modest interest rate relief will also provide a helping hand,” Porter wrote.

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