CALGARY - Canadian real estate markets remain "remarkably buoyant", especially in light of the deepening housing downturn in the United States and the generally softening conditions in most other advanced economies globally, says a national report released Tuesday.
The report, authored by Adrienne Warren, senior economist at Scotiabank, said from a housing demand standpoint, "economic conditions still favour Western Canada, with its booming resource-based industries and extremely tight labour markets."
"Yet, affordability is becoming a constraining factor in several centres, including Calgary where average home prices have doubled in the past four years," said the Real Estate Trends report.
"The odds of significant overbuilding, or of the price declines that are now occurring in the United States, are still relatively low. Inventories of unsold homes, including condominiums, in Canada's major centres are well contained, particularly when compared with the housing-market upswing of the late 1980s. Tighter lending guidelines for developers and a lower level of investor participation have reinforced a more cautious approach among homebuilders."
Warren said the underlying domestic fundamentals suggest Canada is likely to maintain a relatively healthy real estate market, particularly in the fastest growing regions of the country. But "there is growing concern over the sustainability of these trends in light of the U.S. slowdown and ongoing financial market volatility."
The current housing boom in Canada is the strongest and longest of the post-war era, she said. Between 1998 and 2007, average inflation-adjusted home prices have soared some 65 per cent, easily besting the 32-to-56 per cent appreciation of the prior three housing cycles of the 1960s, 1970s and 1980s.
"The current housing upswing is going on 10 years, whereas the prior three cycles ranged from five to six years," said Warren. "It has also outlasted the housing booms experienced in many other advanced economies this decade."