The Cana­dian Press

The Cana­dian real estate mar­ket will fol­low a sim­i­lar pat­tern this year as that seen in 2010 as buy­ers pull sales for­ward into the early months in antic­i­pa­tion of higher inter­est rates, accord­ing to a report from one of Canada’s largest real estate firms.

The after­shocks of the reces­sion, includ­ing a lin­ger­ing low inter­est rate envi­ron­ment, will con­tinue to influ­ence the Cana­dian real estate mar­ket in 2011 — a year that will be stronger than expected, said the report released Thurs­day by Royal LePage.

Royal LeP­age pre­dicts that aver­age home prices will rise three per cent to $348,600 in 2011, dri­ven largely by a rush to buy in the first half of the year in advance of antic­i­pated inter­est and mort­gage rate hikes in the sec­ond half.

“Cana­di­ans real­ize that inter­est rates are unsus­tain­ably low and that homes will become effec­tively more expen­sive when mort­gage rates return to nor­mal lev­els,” said Phil Soper, pres­i­dent of Royal LePage.

“2011 is expected to unfold much like 2010, when close to 60 per cent of sales vol­ume occurred in the first half of the year in antic­i­pa­tion of inter­est rate increases that never materialized.”

How­ever, the num­ber of trans­ac­tions will be slightly lower than last year and activ­ity will be mod­estly closer to the norm because the pull for­ward phe­nom­e­non last year was exac­er­bated by a tight­en­ing of mort­gage qual­i­fi­ca­tion rules and the intro­duc­tion of the HST in Ontario and British Colum­bia in the mid­dle of the year.

Soper said the exten­sion of low mort­gage rates will be an unex­pected boon to the mar­ket this year.

“Like many Cana­di­ans, we antic­i­pated an end to the ultra-low inter­est rate era before year-end 2010,” he said.

“Para­dox­i­cally, global eco­nomic weak­ness, par­tic­u­larly in the United States, allowed policy-makers and finan­cial insti­tu­tions to keep bor­row­ing costs low, result­ing in a stronger Cana­dian hous­ing mar­ket and a bet­ter than fore­cast fourth quarter.”

Aver­age house prices rose between 3.9 per cent and 4.6 per cent in the fourth quar­ter of 2010, while price appre­ci­a­tion is expected to con­tinue a mod­er­ate and steady climb through­out the cur­rent year.

The report con­trasts with some recent pre­dic­tions by econ­o­mists that prices should remain flat or decline over the next year.

The Cana­dian Real Estate Asso­ci­a­tion has pre­dicted prices will fall by 1.3 per cent to a national aver­age of $326,000, this year, tied to weak­ness in British Colum­bia and Ontario — the hottest real estate mar­kets of 2010. It has also fore­casted a nine per cent decline in sales.

CREA has yet to release year-end data for 2010, but pre­lim­i­nary reports from two of the biggest mar­kets, Toronto and Van­cou­ver, released this week indi­cate 2010 declined as expected.

Sales were down by one per cent com­pared with 2009 in Toronto, while the aver­age home sell­ing price was $431,463, up nine per cent from 2009.

In Van­cou­ver, sales declined 14.2 per cent from 2009, and were 10.3 per cent below the 10-year aver­age for sales in the region. The aver­age sell­ing price in B.C.’s largest city was up 2.7 per cent at $577,808.

Canada’s real estate mar­ket has been on a rebound over much of the past year after sales dried up in late 2008 and hit a multi-year low in Jan­u­ary 2009.

The hous­ing market’s sud­den plunge was sparked by a credit crunch that devel­oped in the U.S. hous­ing and lend­ing indus­tries, and grad­u­ally spread across the globe, caus­ing a world­wide reces­sion in the late sum­mer and early fall of 2009.

The com­mer­cial real estate mar­ket expe­ri­enced a sim­i­lar plunge as investors lost con­fi­dence in the sector.

How­ever, the com­mer­cial mar­ket, which includes office and retail spaces, had a stronger than expected year in 2010 and that momen­tum is pro­jected to strengthen through­out 2011, accord­ing to a report released Thurs­day by CB Richard Ellis Ltd.

Some mar­ket observers had pre­dicted a glut of vacan­cies in Canada’s major busi­ness cen­tres, but that didn’t hap­pen, said John O‘Bryan, vice-chairman of CB Richard Ellis Canada.

We‘ve had good news over the past twelve months with respect to inter­est rates, hous­ing trends and employ­ment gains, with many com­pa­nies announc­ing plans for expan­sion, he wrote in the report.

“2011 may well be another good, sta­ble year but should be viewed with cau­tious opti­mism in light of the con­cen­tra­tion in employ­ment growth on part-time jobs rather than the full-time posi­tions that indi­cate con­fi­dence in long-term, sus­tain­able growth.”

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Con­tact the Jef­frey Team for more infor­ma­tion – 416−388−1960

Lau­rin & Natalie Jef­frey are Toronto Real­tors with Cen­tury 21 Regal Realty.
They did not write these arti­cles, they just repro­duce them here for peo­ple
who are inter­ested in Toronto real estate. They do not work for any builders.
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