TORONTO - October 07, 2009 - Low financing costs and pent-up demand helped restore Canadian existing home sales to pre-recession levels, but the red-hot pace will likely peter out before the year is out, a report showed on Wednesday.
The Bank of Canada lowered rates to an all-time low with an aim to cushion the Canadian economy from external shocks. Instead, this aggressive easing has "proved to be more of a trampoline for resale housing markets," Toronto-Dominion Bank economist Pascal Gauthier said.
As of August, 50-60% of pent-up demand has been absorbed, and if the current pace persists, the demand will dry up by November, TD estimated in its Resale Housing Market Outlook. A sharp shift in consumer confidence has contributed to the rebound, combining with low and favourable interest rates that made home ownership affordable for many Canadians.
Between 45,000 and 53,000 potential sales late last year failed to materialize because consumer confidence froze up during the worst of the global financial crisis, TD estimated.
No other Canadian economic indicator in the past few months has recovered as strongly, and in fact, home sales have now exceeded pre-recession levels and matched the lofty volumes of 2007, TD said.