July 2, 2008

Analysts call end to housing boom in Canada

TORONTO

The Canadian housing market has ceased to be a sellers’ market in both the residential and the recreational sectors, meaning the boom experienced over the past few years is over, analysts say.

The long awaited end of the boom is reflected “in more moderate demand and increased supply of properties for sale,” said TD economist Craig Alexander in an interview following the release of a housing report by the bank.

“I don’t think it’s surprising that we’ve seen that the housing market in Canada is really cooling down,” he said.

Average annual price gains on a national basis were running on average at about 10 per cent between 2002 and 2007.

“If you look back historically, the historical average should be about 4.5 per cent. So the rate of price growth has been double what’s probably sustainable,” he said.

Alexander said the housing market boom was eventually going to come down to earth.

“And really it’s been in the last four to five months that the economic numbers have very clearly shown us that the housing boom has come to an end,” he said.

The year-over-year price growth for existing homes in Canada’s major markets fell to only 1.1 per cent in May, down from 8.6 per cent just four months earlier, the TD report said.

At the same time, new residential listings rose 1.8 per cent on a seasonally adjusted month-over-month basis to 78,878 units in May, the Multiple Listing Service reported.

Royal LePage also said the recreational property market is returning to a more normal state, with price increases moderating.

“Mirroring the trend we are seeing in urban real estate markets, recreational property prices continue to rise, but at approximately half the rate of the increase in 2007,” Phil Soper, president and CEO of Royal LePage Real Estate Services, said in an interview Thursday.

“Improving supply has helped temper price increases this year, which will have a disproportionately favourable impact on cottage seekers when compared to their city counterparts,” he said.

The average price for a recreational property in Canada now ranges between $326,567 and $1,066,389, according to the 2008 Royal LePage Recreational Property Report.

“We’re looking at an average five per cent increase in prices by the end of the year,” Soper said.

Alexander said the trend across the country is “broadly based.”

Canadian Press

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