No ‘bubble’ in housing sales

Thursday, April 29th, 2004

Ashley Ford

Higher interest rates are on their way and the dollar will climb even more, the 10th annual Vancouver Real Estate Forum was told yesterday.

Derek Burleton, senior economist for TD Financial Group, said he expects to see the Bank of Canada move up rates in the fourth quarter following an expected U.S. Fed increase in August or the third quarter.

He said the move will take some steam out of real-estate markets as it will “weaken affordability” for some.

But generally the housing market — especially in the Lower Mainland, which will outperform the rest of Canada — is in no danger of collapsing and will remain robust.

Burleton denied there is “any bubble” in the high-flying market and said buying activity is being “rationally driven.

“We are not seeing the level of speculation” that existed in the market of the late ’80s. The market is much more balanced.”

However, he said housing activity will slow over the next year primarily because of a dwindling pool of first-time buyers, slower population growth and an increase in new home inventories.

“We are already seeing some slowing,” but overall the housing market will remain strong, he said. The fundamentals of the Canadian economy are positive and inflation is being held in check.

He also said Canadian business has already adjusted to a large extent to the rapid rise of the dollar, although he acknowledged it has constrained the economy to some extent.

Rising commodity prices have partially offset the dollar’s strength, which he says will strengthen even more over the next year as interest rates rise.

“A higher Canadian dollar is here to stay and a 79-cent [US] dollar is reasonable over the next year or so,” he said.

© The Vancouver Province 2004

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