With new mortgage rules, a new harmonized sales tax in some provinces and the possibility of higher interest rates all set to kick in this summer, Canadian home buyers are on a tear and it is only going to get busier leading up to this summer, according to the Re/Max Market Trends Report 2010 released Wednesday.
The report, which examined real estate trends in 16 markets across the country, found that unusually strong activity in January -- traditionally one of the quietest months of the year -- has led to a sharp decline in active listings in 81% of markets surveyed. Too many buyers and not enough homes will probably be the main problem in coming months, according to the report.
Markets experiencing the tightest inventory levels include Toronto (-41 per cent), Kitchener-Waterloo (-33 per cent), Ottawa (-30 per cent), Victoria (-30 per cent) and Greater Vancouver (-27 per cent), which also had some of the highest year-over-year sales gains.
The highest year-over-year sales gains were reported in Greater Vancouver (152 per cent), Kelowna (121 per cent), Greater Toronto (87 per cent), Victoria (69 per cent), Hamilton-Burlington (58 per cent), London-St. Thomas (55 per cent) and Calgary (47 per cent), the report said.
Western Canada dominated the list of centres with the greatest increases in price, with Victoria home prices jumping 25.5 per cent in January compared with the same month a year before. Kelowna jumped 22 per cent and Greater Vancouver rose 19.5 per cent. St. John's saw an increase of 23 per cent and Toronto rose 19 per cent.
"While home ownership is still within reach in many major centres, levels are slipping. There is a growing sense, on both sides of the fence, that the time to act is now," Elton Ash, regional executive vice-president at Re/Max of Western Canada said in a release.
With the Harmonized Sales Tax, which will add more tax to home buying in two of the biggest and most squeezed markets - Ontario and B.C. - set to start July 1, and the Bank of Canada's record-low interest rates expected to rise around the same time, that pace of growth could slow dramatically in the second half of 2010. Last week, Finance Minister Jim Flaherty also said starting April 19 all borrowers must meet standards for a five-year fixed-rate mortgage, even if the buyer wants a variable rate mortgage, among other mortgage rule changes.
"There have never been so many motivating factors in play at once," Michael Polzler, executive vice-president of Re/Max Ontario-Atlantic Canada said in a release. "We're in for a heated spring market that will, in all probability, spill over into the summer months, as the window of opportunity draws to a close. The supply of homes listed for sale has been drastically reduced, housing values are once again on the upswing, and banks and governments are moving in unison toward stricter lending policies."