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ALBERTA LINK: The $36 million Park Bridge at Kicking Horse Pass linking B.C. and Alberta opened August 31: 21 months ahead of schedule, and indicative of the huge scale of major construction projects across British Columbia. Inset: workers celebrate bridge opening. Photo: Bilfinger Berger BOT Inc.
The Canadian housing market is largely immune to the turmoil south of the border, a major bank has concluded “The fundamentals underpinning Canada’s housing market are still quite strong,” said Adrienne Warren, senior economist at Scotia Economics. “Unemployment is low, immigration is high and apartment vacancy rates are tight. There is little evidence of overbuilding or speculative buying. The industry also has relatively little direct exposure to subprime lending, with these loans accounting for only about five per cent of domestic mortgages in recent years compared with about 20 per cent in the United States. But, Warran cautioned that, “Affordability is becoming increasingly stretched for many would be buyers after almost a decade of rising home prices.” Moreover, from a long-term perspective, there is growing evidence of overvaluation in home prices in some parts of the country, a precursor to a period of softening conditions. In all but one of 15 cities examined in a Scotia report, price levels are above their long-term trend. The national average deviation at mid-year was roughly eight per cent, however, there are big regional variations, ranging from just one per cent in Ottawa to 25 per cent in Edmonton. “At the peak of the prior two housing cycles in 1976 and 1989, national home prices were 12 per cent and 18 per cent, respectively, above their long-term trend. The smaller degree of overshooting this time around, and the sustainability of price appreciation, may reflect in part an undervaluation of Canadian real estate prices in the late 1990s and into the early part of this decade.” Most major markets in Canada are still categorized as sellers’ territory in which prices would be expected to rise faster than inflation, Warren explains. “The further home prices climb above underlying economic fundamentals, the greater the risk of an eventual correction,” said Warren.
More now own a home
Statistics Canada reports that a record 68.4 per cent of Canadian households are now owned by their occupants, up from 65.8 per cent in 2001, and 60.3 per cent in 1971. The increase in ownership is also attributable to demographics, as empty nester baby boomers move to condos in droves, Gauthier said. In other words, more people may own their dwelling, but those households are increasingly located in condos and townhomes. A recent report on condominium prices in eight major urban areas by Genworth Financial and the Conference Board of Canada indicates demand from aging baby boomers will push up prices in the condo market.