Toronto Real Estate Board says GTA resale housing market still down
March 19, 2008
-- Resale home transactions in the Greater Toronto Area continued at a moderate pace during the first half of March, Toronto Real Estate Board President Maureen O’Neill announced today.
With 3,183 transactions to mid-month, sales in the GTA and in Toronto declined 14 per cent and 18 per cent respectively compared to the same timeframe a year ago.
"It’s important to recognize that we have endured the snowiest winter since 1939 and this has undoubtedly affected the market," said Ms. O’Neill. "The storm that pounded the GTA during the second weekend of March likely had more people focused on shoveling sidewalks than house hunting."
Despite moderate activity, the value of homes in our city continues to appreciate. At an average of $385,405 in the GTA and $409,116 in Toronto, prices have increased five and four per cent respectively compared to a year ago.
As well, some neighborhoods experienced an increase in activity during the first half of March.
At the North end of the Greater Toronto Area, Georgina (N17) experienced a 39 per cent increase in sales during the first half of March, driven mainly by detached home transactions. The Agincourt area of Scarborough (E07) experienced a 12 per cent overall increase in sales compared to a year ago based primarily on strong condominium apartment sales.
Strong condominium apartment sales also allowed the Weston area in York (W04) to hold strong, with a 28 per cent overall increase compared to a year ago.
Toronto's Downtown core (C01) has also experienced healthy sales activity so far this month, due to strong condominium apartment sales as well. Overall sales in this area were up 11 per cent compared to a year ago.
"Condominium apartments have weathered the winter best so far this year, with 733 sales to date but we remain confident that once the snow has melted, we will see a very active spring market overall," said Ms. O’Neill. "The land transfer tax in Toronto concerns us and we continue to keep a watchful eye on how this tax plays out in the market."
Canadian and U.S. Housing Markets Moving in Opposite Directions
The National Association of Realtors (NAR) reports that existing-home sales in the U.S. will drop from 6.48 million last year to 5.67 million in 2007, and that the Pending Home Sales Index is down 20.4 per cent compared to last year. Canada Mortgage and Housing Corp. (CMHC) says that 2007 will close with 521,000 existing-home sales in Canada, a new all-time record, up from 483,223 last year. In the country's largest housing market, Toronto, a new all-time sales record was set with six weeks to go before the New Year.
Why the big difference? A new report by Eric Lascelles, chief economics and rates strategist with TD Economics, says housing is the "poster child for the regulatory differences" between the two countries.
"Conventional wisdom suggests that as the U.S. economy goes, so goes Canada," he says. "There is a great deal of truth in this belief, due both to the trade ties and a broadly similar economic structure. But at the same time, there can most certainly be the odd decoupling of the two nations."
In his paper, Canada and the U.S.: The Odd Decouple, Lascelles says the most profound difference between the
The National Association of Realtors (NAR) reports that existing-home sales in the U.S. will drop from 6.48 million last year to 5.67 million in 2007, and that the Pending Home Sales Index is down 20.4 per cent compared to last year. Canada Mortgage and Housing Corp. (CMHC) says that 2007 will close with 521,000 existing-home sales in Canada, a new all-time record, up from 483,223 last year. In the country's largest housing market, Toronto, a new all-time sales record was set with six weeks to go before the New Year.
Why the big difference? A new report by Eric Lascelles, chief economics and rates strategist with TD Economics, says housing is the "poster child for the regulatory differences" between the two countries.
"Conventional wisdom suggests that as the U.S. economy goes, so goes Canada," he says. "There is a great deal of truth in this belief, due both to the trade ties and a broadly similar economic structure. But at the same time, there can most certainly be the odd decoupling of the two nations."
In his paper, Canada and the U.S.: The Odd Decouple, Lascelles says the most profound difference between the Canadian and U.S. economies is the way the housing markets are going, and "it is the factor that most supports a decoupling of the two economies going forward."
He says the U.S. housing market is "extremely weak, and continues to decline. By contrast, the Canadian housing market has held together quite nicely, and shows no obvious signs (or need) of crumbling."
The health of the Canadian housing market is largely because of the difference in regulatory matters in the two countries, Lascelles says.
"The Canadian banking sector was less adventurous than the U.S. over the past several years, choosing not to mimic the U.S. innovations of ever-more precarious mortgage products that are now coming home to roost in the form of elevated default rates, major bank losses, and declining home prices," he says. "Canada's securitized mortgage market is also substantially smaller than in the U.S., leaving more debt on the balance sheet, and thus ensuring caution."
The mortgage market in Canada has traditionally been dominated by a few large banks, and is less competitive than in the U.S., he says. "In turn, this is at lease partly due to government regulations that limit foreign competition in the sector."
Another regulatory factor that has helped keep Canadian mortgage defaults in check is that high-ratio mortgages must be insured, which is not required in the U.S. In addition, mortgage interest is not tax-deductible in Canada.
Lascelles says that cultural differences between the two countries are also a factor. "Canadians tend to be more risk adverse than Americans," he says. "For instance, Canadians are generally more inclined to invest in safe investments, and less inclined to be innovative (as reflected in a lower rate of patents per capita)."
While noting that the idea that Canadians are more conservative may not true, given "Canada's orientation toward the relatively volatile commodity sector," Lascelles says that "Canadians were less inclined than Americans to speculate in the housing market on further home price gains, and less likely to pursue mortgages that were onerous in a rising interest rate environment. The Canadian mortgage delinquency rate remains extremely low, for instance," he says. "These two factors -- differing regulations and culture -- have ultimately translated into a substantial economic divergence between the two countries recently."
Looking ahead, Lascelles says it's likely that the two economies will grow at a similar rate. However, he says that if the U.S. weakens more than is forecast, "Canada is less linked to the U.S. than in the past, and so would not be dragged down as much as the historical norm." He says the Canadian housing market is likely to stay "on solid footing, while the U.S. market continued to stumble."
It's worth noting that despite all the concern over a soft U.S. housing market, 2007 is still posed to be that country's fifth highest year on record for existing-home sales, according to NAR. It is predicting a modest recovery in 2008, up from 5.67 million this year to 5.69 million by the end of next year.
Meanwhile, CMHC predicts that Canadian resales will slip a little, from 521,100 this year to 500,800 in 2008. That would be the second-best year ever. Demand for home ownership in Canada will drop a bit next year because of rising mortgage carrying costs, says CMHC.
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