Real Estate Market

Commentary

The resale housing market finished the year on a high note.  Strong demand in the second half of the year pushed annual sales for 2009 over 2008 levels. With the Bank of Canada’s continued commitment to leave the interest rate low, mortgage rates continue to be favorable for buyers. More sellers are also jumping back in the market.

The strength of the housing market has spurred discussion of a possible housing bubble throughout the second half of 2009.  CREA Chief Economist Gregory Klump points out, “The extraordinary decline in activity one year ago and subsequent rebound, particularly for higher-priced real estate, is stretching current year-over-year comparisons,” he said. “By the second half of 2010, price gains are likely to shrink significantly, since a year will have elapsed since the decline and rebound. Further expected increases in supply will also take some steam out of the market.”

World Economic Forum

Consumers have increased their consumption of domestic products, supporting the economy over the past several months, but they cannot continue to do so indefinitely without overextending themselves. As recovery picks up across the globe, eyes turn to other nations to import Canadian products. The condition of the economy will likely serve as an indicator of the amount of importing capacity those countries have.

The World Economic Forum’s most recent meeting in Switzerland showed an overall consensus of generalized recovery. 

The increasing U.S. GDP has spread optimism–particularly for Canada, as the United States is the number one importer of Canadian goods and materials. However, high levels of unemployment are expected to continue for some time. Asia, on the other hand, is now close to total recovery. China grew by nearly 9 percent in 2009.  However, the global economic condition will not truly stabilize until imbalances are addressed, policy makers say. The West has immense levels of debt juxtaposed against a huge savings rate in the East. The representative from China indicated they will focus on stimulating domestic consumption, but that it will be a process over several years. China imports many of its raw materials from Australia and Canada. 

Experts indicated that recovery, although sluggish, has grown deep enough roots that they now do not see a “double dip” recession. Growth in Canada will likely continue to depend on the world economic condition as the major economies begin to recover and hopefully increase their imports from Canada. 

Source: The Financial Post