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A very positive look at the Canadian real estate market appeared in a recent article from Scotia Capital. The question asked in the report is ‘Why the Canadian housing market is doing better than the rest of the world’? Are we seeing the Canadian real estate market climbing and what is the potential of this rise?
The property market in Canada is being supported by numerous factors. Properties listed early in the year disappeared very fast. Slumps in developers’ margins on houses supported the stock of newly built homes lower. But the most appreciated condition is the non-existing hidden stock of foreclosed houses. These hidden listings symbolize the biggest headaches in the US market.
Although the speculation behind the health of the housing market is in dispute, it is thought that the assistance given to buyers over the last year have helped it. The main diversity between the USA and Canada with regard to the tax motivation packages are in the USA they are time restrained.
We are talking about RRSP retraction limit increase, first-time home buyers’ tax credit, home improvement tax credit or energy and home retrofit tax incentives and rebates, not to mention local incentives. Together with an aggressive attitude from Bank of Canada this makes our real estate incentive package one of the strongest in the world (especially in contrast to the quite good market situation even before the application of stimulus).
The upward flow of the housing market are what are displayed with these points. Even though the setting looks good, as with anything there is always some things to stay away from. Professionals with the Scotia Capital are concerned about the condo outlet in Canada. The catalogue of unabsorbed newly built apartments is slowly storing up (they account for about 13% of annualized housing construction activity) and is not just caused by a seasonal flow in the construction industry. Some professionals are not very comfortable with CMHC estimated stats for unabsorbed condos and believe there may be rising pressure for a price drop in the apartment sector.
The Canadian market has good potential and should absolutely play a substantial role in portfolios’ of real estate investors. The condo market is an area that investors need to watch carefully. Another question about the bullish or bearish outlook comes for the federal government. It would be naive to think that that the results of the housing motivation lures will last forever. Shifting of the future demand to the present over time can cause a serious jump in listings later. Withdrawing the incentives in one calamitous blow could have a destructive effect.
