The Canadian real estate market started 2010 with a 19.6 percent increase in prices. The average house price surged to $328,537 in January, compared with $274,711 a year ago, the Canadian Real Estate Association (CREA) reported. Although home resales dipped 2.8 per cent on a seasonally adjusted basis, home resales activity year over year was still up 58 per cent on an unadjusted basis from a year earlier.
Scotia Capital economist Derek Holt predicted a rush to purchase to occur before new mortgage rules, the July 1st introduction of the harmonized sales tax in Ontario and British Columbia, and second-half rate hikes kick in. “That should continue to give a bid to prices in the spring market,” he said.
Douglas Porter, deputy chief economist at BMO Capital Markets, said signs show that the market will begin to simmer down later this year, but only after another burst of activity in the spring. CREA expects rising inventories to help dampen price gains.
In response to the surge in housing prices, Finance Minister Jim Flaherty moved to make it more difficult to get a mortgage. Borrowers must now meet standards for a five-year fixed-rate mortgage, even if the buyer wants a variable rate mortgage.
“The resale market is becoming more balanced in a number of provinces,” said CREA president Dale Ripplinger. “A more balanced market is likely to result in smaller price increases going forward.” The average house price in January ranged from $155,783 in New Brunswick to $491,571 British Columbia.
We are definitely seeing a recovery across the country in the housing market, but in Toronto and Vancouver we have seen a red hot real estate market. Overall the Canadian market is expected to slow down a bit but I tend to think that the correction will be felt mainly in the areas where they had increases this year.