Property prices and sales in Canada are soaring creating fears about a property bubble with surge most pronounced in Vancouver and Toronto.
Sales of existing properties in Canada were up 73% in November compared to last year’s level, figures from the Canadian Real Estate Association show. A total of 36,383 residential properties traded hands, only 0.4% off of the all time high for November and setting new monthly sales records for Ontario and Quebec.
The national average price gained 19% compared to November 2008 and the average price rose 4.4 % compared to the same period last year. Prices though have risen more in the main markets, up 20% year on year.
Bank of Montreal economist Doug Porter said that the only thing preventing a real estate bubble was the fact that average figures are affected by soaring prices in the main cities such as Vancouver and Toronto. He added though that because property sales were extraordinarily weak at the end of last year and the beginning of 2009 prices will soar.
‘We are on the bubble of a bubble. We could see a bit of a buying frenzy this spring followed by a pop in 2011. This will be but the first in a string of China style gains for Canadian home sales and prices, ‘ he said, likening the situation to that in China where the government is now taking measures to cool the country’s real estate market.
Industry experts attribute the rebound in the Canadian real estate market to the almost zero interest rates, which many home buyers took advantage of to secure mortgages. Strong demand and price increases appear to be drawing more sellers into the market. Nationally, there were four months of inventory in November 2009 on a seasonally adjusted basis, the lowest level in more than two years.
‘National home sales activity last month shows how strongly the housing market has rebounded since the beginning of the year. As we predicted last April, the rebound in resale housing activity led the overall Canadian economy out of recession,’ said CREA President Dale Ripplinger.