Tag Archives: canadian home prices
John Shmuel, Financial Post
Canada’s housing market is expected to cool off this year and next, but isn’t at risk of falling victim to a U.S.-style foreclosure crisis anytime soon, says a new report by debt-rating firm DBRS Ltd.
DBRS says in the report Canada will continue to fare well in comparison to its U.S. neighbour when the Canadian housing market corrects itself and interest rates are tightened. That is because lending practices here are much more sound than in the U.S. market.
“The likelihood of us having the kind of situation they had in the U.S. is extremely low,” said Jerry Marriott, managing director of structured finance at DBRS. “It’s a combination of the lending practices prior to the peak in 2007 — they were more restrained, so there were better underwriting practices in Canada. We also think there are a number of factors in the Canadian market which have lent themselves to more prudent lending.”
Those factors include less aggressive lenders as well as systems designed to keep people paying their mortgages.
Mr. Marriott said a cooling effect is gradually taking hold in the housing market as credit availability begins to tighten, and the HST factors into home buying decisions in Ontario and British Columbia.
That means there’s a greater likelihood this year that there will be a correction in housing prices rather than a continued increase. Mr. Marriott said DBRS expects the market to cool throughout the year and continue to cool into 2011.
“If you add up the factors you would look at as to whether there’s going to be further price increases or the potential for a correction, we don’t see there’s a lot of factors supporting further price increases,” he said. “But there are a number of factors that show there might be some moderation in housing prices.”
That may bode well for potential buyers after a report by Canadiahn Imperial Bank of Commerce this week said that on average, Canadian home prices are 14% over their “fair” value. That represents about 1.5 million homes, or 17%of all dwellings.
The report also highlights that households continue to have a high level of debt, something DBRS says is part of an ongoing trend. But it tempers that by adding that household debt is not as worrying as some analysts have suggested.
For instance, the debt-to-disposable income shows Canadians are generally more indebted than Americans — but the report says this doesn’t reflect certain differences between the two countries that affect income, such as the fact that the United States has lower taxes but Americans pay more toward health-care bills.
Overall, mortgage lending in Canada reached $958.8-billion at the end of 2009. That’s more than double the $414.1-billion 10 years ago. When including home-equity lines of credit, outstanding mortgage-related credit was more than $1-trillion.
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Report shows gain of 11.6% in six cities
Canwest News Service
The latest home-price index from National Bank of Canada, done in partnership with real-estate technical-services provider Teranet, shows prices far ahead of where they were a year earlier, though monthly gains are slowing.
The Teranet-National Bank home-price index showed home prices among six major markets up 11.6% overall in March from a year before, up from annual gains of 9.9% in February and 7.5%in January.
The report said the widening year-to-year gap was largely due to the decline in home prices in the early part of 2009, an effect that carried through to April.
On a monthly basis, prices were up 0.3% in March. In February, they were up 0.2%, and gains for these last two months for which data is available mark the slowest pace of price gains in almost a year.
“The … slowing of monthly gains is consistent with a general loosening of resale-market conditions across the country,” the report said. “For some months now, homes have been coming on the market faster than they have been selling.”
The year-to-year gains have been largely influenced by prices in Toronto and Vancouver, which were up 15.5% and 14.4% respectively, from a year earlier in March. Other markets, which include Calgary, Halifax, Montreal and Ottawa, saw gains of less than 8%.
Calgary had the lowest year-to-year gain at 2.7%. It was also the only one with a monthly decline, with prices down 0.3%. It was the city’s third straight month of lower prices.
The Teranet-National Bank index is based on prices for homes that have sold at least twice. The survey does not provide specific sales figures.
The Canadian Real Estate Association also issued a report, saying that while prices are slowing, no one should expect a downturn like that seen in the United States.
CREA acknowledged that rising Canadian home prices in recent history have outpaced the growth of incomes, and some “stabilization” in the real estate market is due to allow incomes to catch up.
“This ratio [of incomes to home values] will revert to its long-term average as it always does as part of a normal housing-market cycle,” said Gregory Klump, CREA chief economist. “History suggests, however, that it will not do so by means of a significant correction in home prices.”
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