Property sales and prices rising in Canada but experts warn that unemployment could de-rail real estate recovery

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Property sales in some parts of Canada are increasing despite claims that any recovery in the country’s real estate market is some time away and likely to be slow when it does happen.

Official figures just published show that sales in Toronto and Ottawa are soaring. Both cities saw record housing resales in June, according to the data from the Toronto Real Estate Board.

Real estate sales in the Greater Toronto Area rose some 27% compared with a year ago and in Ottawa they jumped 12.5%, both record figures for sales in the month of June since figures began to be recorded in the 1960s.

Now some experts are hoping that this will signal a recovery as prices start rising as a result of demand. Canada is widely recognised as being far more likely to have a stronger recovery rate than the US as it has not suffered the same kind of toxic mortgage crisis.

 

‘I think the next stage might be price pressure. The moderation we have seen in prices may not last long if this kind of sales and listing balance remains in place,’ said Doug Porter, deputy chief economist at BMO Capital Markets.

He believes there could be a mad scramble to buy properties across the country as consumers wade back into the market tempted by interest rates at their lowest levels in 50 years. He said that sales have also been rising in other regions.

But not everyone is that confident and some believe that the June figures could just be a blip. ‘We should be less fearful than we were six months ago, but I don’t think we should be exuberant yet,’ said Will Dunning, an economic consultant who specializes in the housing market.

He is warning that by autumn activity could have slowed considerably again. ‘It’ll depend on what happens in employment and the broader economy and how that affects confidence,’ he added.

According to the Canadian Real Estate Association, which represents 97,000 real estate brokers and agents, property prices are unlikely to rise significantly but it does expect the increase sales trend to continue.    It is unemployment that is the biggest fear. ‘We don’t expect the recession to end until the fall. It’s clear that this remarkable surge in resales and prices has been driven by record low mortgage rates,’ said Sal Guatieri, senior economist at BMO Capital Markets.

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