Royal LePage Housing Market Outlook

//Royal LePage Housing Market Outlook

Royal LePage Housing Market Outlook

Amit Kalia at Royal LePage presents podcast by Linda Leatherdale, money editor of The Toronto Sun and host of MONEY LINE on Rogers Television, and Phil Soper, president and CEO, Royal LePage Real Estate Services, discuss the Canadian Real Estate market and the outlook of where the market is headed.

Listen to Canadian Housing Market Outlook

LISA:  Welcome to the Royal LePage Helping You in Real Estate Podcasts. I'm your host Linda Leatherdale. This series of podcasts will feature some of Royal LePage's most knowledgeable experts to provide valuable information on the residential property market. Now in this segment we will be looking at an overview of the Canadian real estate market and a forecast of where the market is headed.

Today, we have Phil Soper, President and CEO of Royal LePage Real Estate Services joining us to discuss the trends in Canada's housing market. Welcome Phil.

PHIL:  Great to be here.

LISA: Well, you know what, it seems like we're having another booming year in the Canadian real estate sector and you know this has been going on forever and ever, how is the market really doing?

PHIL:  The market is healthy, and it might surprise our listeners to know the only part of the country that I'd say is a little off-balance would be Alberta and perhaps Saskatchewan, so the rest of the country is in really great shape.

LISA:  Okay, Alberta because of the oil boom and it just keeps going on and on and appreciation values went way up…

PHIL:  Right, I mean, when you think about it, a healthy market is one in which buyers and sellers have an equal shot at both getting value out of the transaction… and things are so far tilted in the sellers' favor in Alberta right now that it's unhealthy.

LISA:  Okay, well but again we have these doom-sayers saying this has been the longest-running bull market in history and some people say the crash is coming, is there anything to that?

PHIL:  Most long-term trends are followed, long-term growth trends are followed by a period of low or no growth; it's actually very rare if you look back over the last fifty years where there's a national correction in housing prices. So what we see today is actually following the long-term trend. We had a period of rapid expansion through the first part of this decade and now prices are appreciating in most of Canada by single digit amounts of  5%, 6%, 4% that's sort of thing.

LISA:  Okay, when you look back to 1989, there were very few renters that could afford to buy; so for affordability, is it getting eroded or is it still affordable to get into the market?

PHIL:  It is much less affordable today for Canadians in general than it was six years ago, after a sharp correction at the end of the eighties in the marketplace. However, in Central Canada and Atlantic Canada, this is what we're talking about Ontario, Quebec and the Atlantic provinces, affordability is actually leveled out and even improved a small amount over the last year. Price of utilities, taxes have stabilized and price increases have dropped back, price still going up, but by three, four, five, six percent which is manageable and people's incomes have been rising by more than that. So things have actually improved a tiny bit, I'd say leveled off for most of Canada. Not so in the west, but again that's another market.

LISA:  So then, what do you see in the forecast for price increases?

PHIL:  Nationally, we'd expect prices to increase by 9 ½ % through 2007, which is up over our original forecast. Most of that increase is because the increases in the west, in Alberta and Saskatchewan, have been ahead of what we expected. We're just about right on forecast though for mid single digit price increases in Central Canada.

LISA:  So Phil, this summer, that summer 2007 we saw lending rates go up and that's the first time in over a year; we also have some analysts predicting lending rates to go slightly higher to the end of this year, will this have an impact?

PHIL:  People acquire homes based on their carrying costs, so their monthly mortgage payments, not based on their sticker price. So anything that increases a monthly payment will have a slowing effect on demand; so the short answer is yes, rising interest rates will cool the market. However, we're still well, well  below that 1989 peak we talked about before in terms of the cost of money, and most consensus forecasts are for a short duration of moderate fee increases in the cost of  money. It's a tough job that the central bank has in this country because Alberta and, to a lesser extent, British Columbia and Saskatchewan really do need an interest rate increase to curb inflation especially wage inflation. But in Ontario and Quebec, the rest of Canada we could do just fine with interest rates the way they are; so most of us expect the bank to take a modest middle-of-the-road approach with interest rates which should not have a big impact on the housing market.

LISA:  So what I find interesting is that prices are going higher but the luxury end of the market continues to go higher as well, and I guess baby-boomers like to convert their paper wealth into a luxury home… so what is your carriage trade report saying about the luxury market for this year?

PHIL:   You know, the baby-boomer market, in particular the wealthiest market in the history of our country, has a lot of disposable income, a lot of equity built up in their personal portfolios and their comfortable investing it in real estate. So, the demand for well-appointed properties remains strong right across the country, and we expect that as long as the underlying economic trend is positive in this country that the luxury segment will be of particular interest.

LISA:  And what's interesting is some of these wealthy home owners is they just don't own one home property, am I right?

PHIL:  No, it's very true. Some 25% of wealthy home owners own two properties, 6% own three, and a lucky 2% own more than five residences.

LISA:  What are you going to do with five residences? And, of course, if you're a real estate investor, you're probably making money.

PHIL: Exactly.

LISA:  Who are the people that are living in these luxury homes?

PHIL:  Well, it's interesting, you know it tends to be a broad, broad cross-section of Canadians with entrepreneurs heading up the list. About 13% of luxury homes are owned by entrepreneurs. Senior executives make up the next block but then we're into professionals like lawyers, doctors, sales professionals that sort of thing. So it is a group of people, not the inherited-money set.

LISA: Well that's what I was going to ask you, the secret to owning a luxury home, do you have to be born into that rich family then to really own one?
 
PHIL:  Well, you know of high net-worth Canadians, almost half in the most recent Royal LePage survey on this effect, 46% site hard work as the main driver to attaining wealth. The number two driving force was this ambition, this desire to succeed and higher education. Only 4%, a tiny almost insignificant number chopped their success up to being born into the right family. So, I guess, that in fact is the Canadian dream.

LISA:  Well, there you go. I find another interesting thing in your poll that these high net- worth individuals started from very modest beginnings.

PHIL:  You know what, you're absolutely right, only 3% of the people owning these luxury homes in the last survey were high net-worth, wealthy people at birth so most of them earned it. However, we actually sold over the last week the most expensive home that's ever been for sale in Toronto-proper, and I think it's an interesting little case study in what's happening in the high end luxury market as well. This home sold for just under 16 million dollars, it's a former estate of the Eaton family in Forest Hill, and the previous owners were from off-shore; and they were looking to sell the home for 25 million dollars in 2004 and they had no takers. However, they recently completed the deal, as I said, at just under 16. The strong Canadian dollar allowed them to bridge the gap between their expectations of 25 million and the 16 million. That 16 million Canadian is worth almost what it was at the beginning of 2004 at 25 million. So, there at the very high end of the luxury market currency fluctuations, the state of the stock market, lots of things play a role.

LISA:  Well, thank you Phil for sharing your views on Canada's Housing Market in 2007. We'd like also to thank you, our audience, for listening in.

By | 2017-01-23T12:11:20+00:00 October 24th, 2007|Categories: Realty Talk|Tags: , |Comments Off on Royal LePage Housing Market Outlook

About the Author:

Amit Kalia
Amit is a full time local REALTOR® since 2003. Currently he is with RE/MAX Real Estate Brokerage Inc. in Mississauga. RE/MAX is Canada's #1 real estate company. He is supported by a very strong Sales and Marketing team. Together with his team, Amit has been serving property sellers, first time buyers, real estate investors, landlords, renters, new immigrants to Canada and non-residents. Amit and his team specialize in Square One condos and also work in many other Mississauga neighbourhoods. Team Amit Kalia offers a 30 Days Sold Guarantee to Sellers. Amit's team also provides exclusive A La Carte property management services for their investor clients and landlords.