CALGARY, AB - The bright lights of the ‘Canadian real estate market’ are dimming in Toronto and Vancouver and focusing on Alberta’s two largest cities, says an economic research paper from Laurentian Bank Securities.
The markets in Canada’s two largest cities have been red hot in the last several years; so hot, new mortgage regulations introduced last month were designed specifically to cool them down for fear of a housing bubble bursting.
Since the onslaught of the recession, Calgary and Edmonton have experienced a minor bubble burst.
After being the hottest markets in the country from 2005 to 2007, each city saw decreases in prices and sales in the new and resale markets from 2008 to last year, but the shine is back on Alberta, says the paper.
“This year, both Edmonton and Calgary should see their housing market activity return to pre-recession levels,” it says.
“The momentum is very different in contrast to the rest of the country and all real estate drivers point towards an increase in both prices and activity.”
The key drivers are the highest population growth in the country, an increase in new housing starts and an upward trend in building permits.
The paper uses the “B” word when talking about new home starts.
“The boom in new construction that is ongoing since the beginning of the year is fully justified and is also the result of (a) higher perspective of population growth.”
It’s not a boom by historical measure in Calgary, but it’s close.
Stats from Canada Mortgage and Housing Corp. show new home starts in the Calgary Census Metropolitan Area (CMA) to the end of June were 7,044 units, up from 3,530 units last year but well off the first six months of 2006, with 9,029 starts (2006 was the record year for starts in Calgary: 17,046).
The air is going out of house prices in Canada’s two largest markets, says the paper.
In Toronto, they are likely to stagnate while Vancouver is experiencing price drops that are turning heads — the result will be national news stories about the depreciation of the ‘Canadian real estate market.’
From a national perspective, it’s true, says Laurentian Bank securities, but not so fast, it adds.
“In our opinion, overall prices are indeed exceptionally elevated. However, evaluating and quantifying the extent of overvaluation is like trying to predict the number of medals Canada will win at the London 2012 Olympic Games,” it says. “It depends on a broad range of factors specific to each CMA as well as the fact that different markets are operating at different phases of the real estate cycle.
“Therefore, dynamics are different from one CMA to another, which makes it clear that there is little reason for price movements in different CMAs to go in the same direction at the same time.”
It appears the direction in Alberta is up.
BY MYKE THOMAS ,CALGARY SUN
FIRST POSTED: SATURDAY, AUGUST 11, 2012 02:05 AM MDT