Scotiabank released their Global Real Estate Trends report yesterday and while their assessment of the Canadian housing market wasn’t all peaches and cream, it was far from the doomsday prophecies some Canadian publications have been bandying about lately.
The Scotiabank economist behind the report, Adrienne Warren, had this to say about the Canadian housing market:
“We expect sales and prices will be relatively flat in the year ahead. Even with interest rates forecast to remain low well into next year, public sector restraint and a lack of pent-up demand will temper both first-time and move-up buyer activity.”
She added that stronger job and income gains and more positive demographic trends favour Western Canadian housing markets.
In her view, a cooling off period is just what the market need to help re-balance housing valuations thus allowing fundamentals like income to catch up to prices.
Writing on the specter of a housing market collapse, Warren contended that the risk of a major price correction is low barring a major economic or financial shock. She also noted that there is little evidence of widespread overbuilding or speculative buying activity.
“Canada’s mortgage market is sound, and delinquency rates are low,” she concluded.
Warren’s report also addressed the Toronto condo boom.
Citing a historically low level of single and semi-detached home construction, coupled with near-all time high apartment unit construction and population growth, she expects high-density living to become increasingly the norm.
She noted that the “aggregate level of unsold inventory is low by historical standards.” While acknowledging the anecdotal reports of investors accounting for a significant share of Toronto condo sales, Warren predicted that many units currently under construction will not be absorbed but instead returned to the rental market.
Good news for renters considering Toronto has one of the lowest vacancy rates in the country.
And that’s your daily(ish) dose of economics!