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Factors affecting the housing market, here are CMHC’s predictions for 2012:

·         Interest rates will remain stable and low: 5.2 to 5.7 per cent expected long-term rates, and 3.4 to 3.8 per cent expected short-term rates.

·         China’s economic growth is expected to slow down, BC’s economic growth to slightly increase, and Canada’s to slightly slow down in 2012.

·         CMHC sees slower growth in the US next year, but they’re not predicting a recession.

·         BC is well-positioned to benefit from global trade, with trade patterns having shifted considerably away from the US since 2001, and much more trade with China, Korea and other Asian countries.

·         Consumer pull-back slows growth this year, but comes back in 2012. Consumer spending is expected to improve.

·         Retail sales are up marginally, by about one percent in BC, but lower in Vancouver.

·         More stability and more jobs expected for northern BC resource centres. In Vancouver, employment is up four per cent over the last peak. The rest of the province is much lower or declining.

·         BC businesses are seeing an increase in corporate profits. Expect planned investment to increase.

·         Alberta is leading the country in job growth, but will slow more in line with BC going forward. The West will lead in GDP growth in Canada next year: BC at 2.7 per cent and Alberta at 3.5 per cent.

·         Vancouver will account for the lion’s share of new home construction in the province in 2012. Multiple-family construction will account for the largest share.

Migration continues to affect growth in the province. Household formation – which includes children growing up and forming their own households and people moving to BC – is forecast to pick up slightly in 2012.

Typically, 34,000 new households form in the province each year. According to CMHC research, within six months of arrival 17 percent of new immigrants are homeowners. At four years, more than half of new Canadians are homeowners.

Immigrant investors bring $1.6 million in personal wealth, and make an $800,000 initial investment. Of investor immigrants, 70 per cent come here from China and 14 percent from Taiwan. Just under half of all investor immigrants in Canada land in BC.

Vancouver attracts younger people, with the majority of immigrants in the 18 to 24 year-old and 25 to 44 year-old groups. Younger people are likely to create demand for a stronger rental market. BC also tends to gain from Ontario and Alberta in migration, with people from Ontario showing a preference to live in Vancouver.


Real estate buyers to focus on low interest, ignore market turmoil: economists

Mary Gazze, The Canadian Press, On Tuesday August 16, 2011, 5:44 pm EDT

By Mary Gazze, The Canadian Press

TORONTO - Canada's real estate market is now expected to grow this year rather than decline, as buyers take advantage of continued low interest rates that are intended to offset recent economic turmoil, economists said Tuesday.

The comments came after the Canadian Real Estate Association revised its 2011 national forecast for home resales, citing stronger than expected sales and higher prices in the second quarter.

An earlier CREA forecast that called for a one per cent dip in sales this year from 2011. But the association said Tuesday sales should grow this year — albeit less than one per cent above 2010.

CIBC deputy chief economist Benjamin Tal said recent stock market uncertainty due to the European debt crisis and the United States credit downgrade is actually helping boost sales in Canada's real-estate market.

Bad economic news abroad tends to keep Canadian interest rates low, he said.

Since the European and American debt issues came to a head in recent weeks, economists have been predicting the Bank of Canada will leave its key rate untouched at one per cent until at least next year.

That's a change of opinion since last winter, when economists widely expected Canada's central bank would begin hiking its rates sometime in 2011 as the economy strengthened — putting upward pressure on the price of borrowing.

With the global economy now looking weaker than expected, and the U.S. Federal Reserve promising last week that it will keep its key short-term rate at an all-time low for another two years, the Bank of Canada is now expected to put off raising its short-term lending rates.

"The uncertainty globally is really benefiting mortgage holders because it's really postponing the increase in interest rates in Canada," Tal said, explaining that when the stock market turns volatile, real estate becomes an attractive investment because of its security.

"Many people can use this opportunity to look into extremely low mortgage rates, so again the misery of other people elsewhere is helping Canadian home buyers."

Sonya Gulati, an economist at TD Economics said the bank is anticipating that sales will be a bit more subdued in the next two months, but buyers, especially first timers and immigrants won't likely be deterred in the longer term as interest rates stay low.

"People may be waiting to see whether or not they want to purchase homes, see if things turn for the better. It really has been a roller coaster for the last little while so we anticipate a little bit more subdued activity in August and September," she said.

"(The stock market) will be a factor in their decision making process, but at the end of the day one of the key things for people is the interest rate and mortgage rates are still very low and they may actually want to enter the market for that reason despite the uncertainty out there."

Meanwhile, CREA's chief economist Gregory Klump said it is too early to judge whether buyers are moving towards or shying away from real estate due to volatile stock markets. But he said historically, real estate does well during times of uncertainty.

"During periods of financial market upheaval the Canadian real estate market has remained far more stable," he said, adding that even though some investors put off buying high end homes during the financial crisis of 2008 and 2009, those buyers returned to real estate soon after recovery began.

"The last time we had financial market instability, the housing market wasn't immune, but it was certainly less volatile and certainly Canadians recognize that and feel comfortable investing in their home."

Overall, CREA said Tuesday that 450,800 housing units are expected to be sold across Canada under its Multiple Listing Service in 2011, and the average selling price will be slightly higher. In May, it had estimated 441,100 units would be sold through the MLS.

About 90 per cent of home resales in Canada are listed on MLS.

Both Gulati and Tal said they expect the market to cool off in 2012 once interest rates rise again. Gulati said home prices could fall as much as 10 per cent, while Tal said they could fall between five and 10. Gulati described this as a "correction" while Tal said it was an "adjustment," but "nothing to write home about."

Meanwhile, the association said it was revising its sales expectations for 2012 downward to 447,000 units, roughly on par with the 10-year average.

On a regional basis, British Columbia's 2011 sales forecast has been revised slightly higher as home sales in the province appear to have bottomed out soon than predicted, while stronger than expected activity in Ontario is expected to offset slightly softer than anticipated demand in Quebec, Manitoba and Newfoundland and Labrador.

CREA said it now expects the national average home price will rise 7.2 per cent in 2011, to $363,500. The previous estimate in May was $352,500.

The upward revision reflects increases in the second quarter in Vancouver and acceleration in other parts of the country, particularly Toronto. Vancouver has experienced a surge in multimillion-dollar home sales this year.

CREA said the two markets have a high number of sales and average price, so they play a big part in influencing the national average.

Additional new listings should also result in a more balanced resale housing market in most provinces, with the national average price forecast to stabilize in 2012.


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