Canadian Real Estate Forecast and Toronto Real Estate Outlook for 2008 by Royal LePage

Submitted by Jasmina on Sun, 2008-01-13 17:07.

Despite the U.S. housing recession, where home sales are to hit bottom in early 2008 and the current housing crisis is expected to run through early 2009, Canada's real estate market continued to post significant price gains in the fourth quarter of 2007 and showed little sign of the usual winter slowdown. Toronto Real Estate Board Market Watch reported 2007 was Best Year Ever, with 4,646 sales in December and year-end sales of 93,193. This is 12 per cent higher than year-end sales in 2006 and 11 per cent higher than 2005, the Toronto market's previous best-ever annual performance!

Here is a summary of recent Royal LePage Real Estate Reports and interviews our president Phil Soper did with the Canadian media to discuss the Canadian Real Estate market and the outlook for 2008.

2007 was a record-breaker for the Canadian Real Estate market. The big stories were price out west and volume in central and eastern Canada. We knew prices would continue to appreciate in the west but the pace of appreciation particularly in the first part of the year really defied all expectations; and in Ontario and Quebec we saw the number of homes trading hands really spike up in the second half of the year; very, very strong year for real estate. Toronto area displayed high levels of home buying activity in the fourth quarter, despite the city’s rising house prices, partly related to the introduction of a new Toronto Land Transfer Tax.

2008 Market Survey Forecast

As we move into the new year, activity levels are expected to wane from the frantic pace that many regions of the country experienced in 2007. However, average house prices in Canada (including Toronto area) are expected to continue to rise, but at much more moderate pace. Royal LePage is forecasting Canadian home prices to rise by 3.5 per cent in 2008. The number of transactions is forecast to slip by four per cent to just over half a million - still above the number of sales in any year before the record pace of 2007. Toronto area house prices will also increase by 3.5 per cent in 2008.

Toronto Star business reporter Tony Wong finds "Royal LePage's 3.5 per cent price-rise forecast for the Toronto area is in line with consensus estimates. The most bullish is by ReMax Ontario Atlantic Canada for a 5 per cent increase. Toronto-based housing economist Will Dunning predicts a 3 per cent rise".

Canada is in one of the longest housing market expansions in history, but in 2008 it's likely that eroding affordability will reduce demand, allowing the market to move toward balanced conditions, with lower levels of price appreciation, and fewer homes trading hands.

In his Housing Market Digest for Greater Toronto Area, Will Dunning writes that affordability deteriorated in 2006 & 2007 without affecting housing demand: "Recent experience (and my modeling) suggests that affordability isn't really important. If people have jobs and confidence and they want to buy, they will find a way to buy".

2008 will be a much better time to buy a home than in previous years

because the rate of price appreciation will be lower. And in any market, in terms of unit sales, first-time buyers are the most active group. If you look at all the homes sold in a year, first-time buyers range from 40 per cent of all transactions in a very slow market, up to 70 per cent of transactions in a very active market. And what we see in 2008 is that falling interest rates, new loan products that allow them to amortize payments over a longer period of time—thereby dropping their payments—and a slowing rate of price appreciation, will all add up to create a good time for first-time buyers to come into the market, if they’re working and confident. And that’s the other thing that’s really driving this market: people are working, they have confidence in the economy.

How can this be in Canada when the south of the border we have this huge sub-prime crisis?

Well just as the Canadian dollar has charted its own course, so has the Canadian economy and the Canadian housing industry. Unemployment is low, immigration numbers are high and the cost of money has actually come down as the high Canadian dollar has allowed the central bank to ease up on interest rates. Also, buyers do not acquire homes based on their sticker price; they look at monthly payments and a couple of things; one the easing cost of money in terms of interest rates, the other the availability of long amortization periods for first time buyers or, in fact, for anyone whose looking for a way to get into a more expensive home at a reasonable monthly cost.

Other Tips for Home Buyers and Sellers in This Market

We will be looking for more balanced conditions in 2008 and particularly in areas where prices have run-up fairly quickly over the last few years. It's important for sellers to realize that that's not going to be the case in 2008. It's going to be important for sellers to price properties appropriately, to expect them to take a reasonable amount of time to sell because, frankly, they've been selling much quicker than the long-term average over the last few years as supplies have been short; and to align themselves with a real estate agent who's a specialist. Not only in their location, but one who specializes in the housing type that they're trying to sell a luxury home, a condominium, etc.

And we do at Royal LePage have agents who specialize in working with specific buyers and seller categories as well. We have a specialist designation (SRES®) for those working with the 50+ who may be looking to diversify into different forms of home ownership say moving away from the big suburban home to a condo at and a recreational property for example and they have the relationships with people such as estate planners and things.

To locate a SRES® (Seniors Real Estate Specialist) Designee serving Toronto and York Region choose your city below:

In order to focus on the needs of the mature buyers in Greater Toronto Area, I (Jasmina Zivkovic) have earned this nationally recognized designation as a Seniors Real Estate Specialist. I understand the physical and psychological needs of mature adults and I offer patience, respect and expertise in finding the right type of housing to meet those needs. Call 905-731-2000 for a free consultation.