What is the state of the Real Estate Market

Almost three quarters of Canadians own their own home today and
approximately one third of an individual’s net worth is tied up in their
real estate holdings. Clearly, most Canadians have a strong interest in
assessing the future of the real estate market in the GTA.

There have been recent discussions about whether the housing market is
slowing down. In particular, many major real estate markets in the United
States are experiencing slowdowns.

But what about Canada? Many pundits predict that Canada's housing market
will outperform the U.S.’s in 2007. Reasons cited include continued strong
economic growth in Canada, low and stable interest rates, higher salaries,
strong employment levels and high consumer confidence levels.



In my personal real estate practice, both I and my team have been
exceptionally busy this year. In fact, we are poised to have our best year
ever.

This is also true across the country where real estate activity for the
first half of the year remained above levels posted for the same time period
any other year on record. Also, recently the residential average price in
Canada’s major markets was $294,924, up 10.1 per cent from levels recorded
one year ago.

In the Toronto Area, the resale housing market performed solidly in the
first half of September, according to the Toronto Real Estate Board.

Prices are continuing their upward trend, with the mid-September average
price of $335,208 eclipsing the mid-September 2005 mark of $328,266 by two
per cent. Average prices year-to-date are five percent higher than figures
reported to the same point in 2005.

CMHC’s Ontario regional economist Ted Tsiakopoulos has noted that “while GTA
existing home sales have remained strong, some moderation in activity should
be expected. A ten year expansion in home prices and recent increases in
mortgage rates have lifted home carrying costs. Nevertheless, strong
condominium and townhome sales suggest consumers continue to have choices.”

Also, there seems to be an increasing number of listings in the marketplace.
This means that it is increasingly more important to price a home accurately
from the onset. The number of days a home is on the market— a benchmark many
realtors use to gauge the real estate state of affairs— appears to be
slightly on the rise. Also, there does appear to be a shift from the purely
seller’s market to a more balanced market between both buyers and sellers.

There are some interesting statistics that relate to this matter. For
instance, numbers reveal that the collective net worth of Canadians has
risen by 10 percent over the past year to a record almost 5 trillion
dollars. This works out to be an average net worth of approximately
$400,000 per family. (However, this number is skewed by the net worth of
very affluent Canadians. The medium net worth is closer to 175,000.)

What are the real estate predictions for the future?

After assessing the long-term prospect for Canadian home values, Craig
Alexander, VP and deputy chief economist for TD Bank Financial Group, has
concluded that the national average of home prices will appreciate at
approximately 4% over the next 25 years.

However, Alexander predicts that there will be a considerable degree of
variation from city to city, and a large amount of volatility from year to
year.

It is predicted that larger cities such as Toronto and Vancouver will have
the greatest price gains. Both Calgary and Edmonton will also outperform the
other markets because of low provincial tax rates and a thriving oil
industry. However, the current growth in both Calgary and Edmonton are not
sustainable and a more balanced price increase will return to those regions.

Alexander concludes that the theory of the aging boomers putting downward
pressure on the housing market is largely unfounded. He does believe
however that the shifting population may have the greatest impact on the
upper end/larger homes.

In conclusion, for most of Canada, the housing market will likely continue
to exhibit moderate price increases and stable unit sales, as it did during
the third quarter of this year. Nationally, market trends established
through the first three quarters are forecast to continue for the remainder
of the year. Robust economic conditions, low unemployment rates, modestly
growing salaries and wages, and sound consumer confidence contributed to the
overall strength of the residential real estate sector.