Look out Canada! According to the Scotia Economics, Global Real Estate Trends Report, the global real-estate rebound is losing momentum and Canada has seen a “dramatic” housing slowdown.
Canada had a strong start to 2010 with inflation-adjusted average home prices rising at double-digit rates, “mirroring their relatively more favourable employment and lending conditions.”
While the first half of 2010 was optimistic, the second half is looking a bit more drab. According to the report:
“The slowdown has been most dramatic in Canada. Average home prices in Q2 were up just 6.8% y/y, compared with 16.6% y/y in Q1. Sales, while still at a high level, have trended steadily lower alongside reduced affordability and exhausted pent-up demand. Meanwhile, increased listings are tilting overall market conditions back in favour of buyers. We expect demand to remain at a lower ebb into next year, and prices on average to be roughly flat.”
Between 2000 and the-first-half-of-2010, the resale market was stronger than the new-construction market.
“Sellers of resale homes have consistently commanded greater price increases from buyers over the past decade than have new home builders. Between 2000 and the first half of 2010, the average cost of a new home increased by just over 50%. Over the same period, the average price of a resale home more than doubled…
…Traditionally, the demand and pricing for new homes mirror, but with a lag, trends in the resale market. When resale housing selection is limited, and/or prices are increasing sharply, buyers are more likely to consider a new home purchase.”
While there is a divergence in new and resale home prices, the report shows that the spread varies across the different Canadian markets.
“The biggest gap has opened up in British Columbia, where the lack of developable land in its largest city is a major contributor to its record high home prices. On the other hand, new home prices have largely tracked resale prices in Alberta and Saskatchewan, where a massive influx of population attracted to the region’s booming economy, and the inherent lag in adding sufficient new housing stock, fuelled across-the-board appreciation.”