Evidence Mounts of Soft Landing for Canada’s Housing Market – Financial Post
Canada’s housing market is beginning to show signs of a soft landing, while thankfully avoiding any sort of a major collapse. Increases in demand and buoyant new construction plans are placing doubt on past concerns of a housing crash. In Toronto, home prices rose 5.4 per cent in May from a year ago, resulting in the biggest monthly increase in the last five months. The impact of Jim Flaherty’s policy changes last July are beginning to fade, according to Ann Hannah, President of the Toronto Real Estate Board. Hannah stated, “A growing number of households who put their decision to purchase on hold as a result of stricter lending guidelines are starting to become active again in the ownership market.” Unit sales in Toronto have dropped 3.4 per cent from a year ago, but the composite home benchmark price index has risen 2.8 per cent. David Tully, Chief Macro Strategist at TD Securities, indicated that mortgage rates would have to move dramatically before there would be any major correction in the Canadian housing market.
Canadian Homes Among Most Overvalued in the World – CBC News
The Organisation for Economic Co-operation and Development (OECD) ranked Canadian real estate the third most overvalued real estate market in the world. In their recent report, OECD compared the value of housing in 34 wealthy countries worldwide. The only two countries ahead of Canada in the report were Belgium and Norway. OECD uses two measures to determine the value of housing. The first measure is the price of an average home compared to what it could be rented for. The second measure is the price of an average home compared to the average salary. Based on the rent measure, Canadian real estate is overvalued by 60 per cent. Using the average salary measure, Canadian real estate is overvalued by 30 per cent. The OCED report indicates that Canadian real estate is significantly overvalued but prices still continue to rise. This anomaly makes Canada more vulnerable to the risk of a major price correction, especially if borrowing costs were to rise substantially.
Rise in Building Permits Bucks Expectations of Housing Slowdown – CBC News
Statistics Canada reported Wednesday that the number of residential building permit requests rose 21 per cent in April, shocking economists who had predicted a decline. This marks the fourth consecutive month in which permits increased, after trending downwards at the end of 2012. The April results were unexpected but permits are merely an intention to build and don’t necessarily translate into actual housing starts. CIBC Deputy Chief Econimist Benjamin Tal noted this difference in his reaction to the rising level of permits and stated, “There’s a big difference between permits and the willingness to go ahead and break ground if they are having difficulty selling, especially in the high-rise market.” The condominium segment, predicted to have the largest declines, experienced a 51.9 per cent permit rise in April. In comparison, single-family dwellings permits rose by just 1.1 per cent in April.
A look at current mortgage interest rates and 5-year mortgage rate history.
The average discounted mortgage rates in Canada in 2013:
A history of weekly 5-year fixed mortgage rates and 5-year variable mortgage rates.