Today the National Post published some statistics on the housing market from CREA (The Canadian Real Estate Association) citing that the home sales and new home listings are down year over year for the third consecutive month.
Economists remained divided as to the future of the Canadian housing market. Some believe that because levels of household debt are at an all-time high, fluctuations in employment or interest rates have could the ability to burst a hypothetical housing bubble, with results similar to what we’ve seen the United States. Others, such as Toronto Dominion Banks’s chief Executive Ed Clark, believe that because Canadian Banks have avoided subprime lending, Canadians will not experience what we have seen in the US. He believes the Canadian Real Estate market is in a period of adjustment, as in adjusting to the tighter mortgage lending rules initiated in June of 2012.
This moral of this story remains the same: Economists remain divided on their predictions for the future of the Canadian housing market. The good news for us is that if the housing market is inflated, the federal governments legislation seems to be working to slow down housing sales to moderate prices and protect consumers from any large market corrections in the form of bubble bursts.
What remains to be seen is how Canadians will adjust to the inevitable interest rate increases, and the precautions and legislation the government will impose to protect Canadian consumers from feeling the effects of these increases.
Our perspective for Edmonton area real estate remains as it has for some time now – things are looking up. Part of the problem with the CREA stats is that they are heavily influenced by Vancouver, Toronto and to some extent Calgary – three markets that have seen dramatic run ups in the past year in terms of their average value. This has not been the case for real estate in the rest of Canada and especially Edmonton. Edmonton home values have been stable, even with slightly lower demand than previous years. The real kicker for Edmonton is in its strong employment, positive net migration and economic situation. This is probably the most significant reason that the vacancy rate in Edmonton has dropped from 3.2% to 1.7% in a fairly short time.
This does not mean that Edmonton is immune from the media headwinds out of Toronto, and Vancouver and their effects on the National Average. It could actually mean the opposite for Edmonton as people continue to look for and realize that Edmonton is a stable, affordable housing market, that has numerous great communities in which to raise a family.