The numbers are in, and they bring good news for Canadian homebuyers. Price growth is beginning to ease up across the nation, according to Genworth Financial Canada’s Metropolitan Housing Outlook report. For new and resale homes, price growth has quadrupled since 2001, but is expected to slow over the next five years, allowing potential homebuyers to feel a little breathing room.
Calmer market ahead:
In 2008, the rate of price growth should drop about 50% from last year for both new and resale homes across Canada. The return to historically normal levels will give consumer incomes a chance to catch up and buyers should feel less pressure and more opportunity to explore all the choices and financing options available to them.
“Now we’re seeing a calmer market,” said Peter Vukanovich, president of Genworth Financial Canada. “That translates into better opportunities for first-time homebuyers to make an informed decision.”
For homebuyers, this more stable growth is a welcome change from the increases in recent years. Both 2006 and 2007 saw an 8.7% increase in the price of new homes, and there has been a 10.2% average jump in the price of resale homes each year since 2002.
“Rapid price increases, which were virtually unsustainable in regions like Alberta, had begun to erode affordability and put a lot of pressure on first-time homebuyers in terms of their decision-making process,” said Vukanovich.
Housing market still strong:
Overall, Canada’s housing market is expected to remain strong, supported by steady demand and modest price increases across the country. This year’s national average new home price is forecast at $397,789 (a 3.8% increase) with the 2008 average resale home price expected to reach $322,424 (a 5.1% increase). Regionally, the strongest housing demand can be found in B.C., Manitoba, Alberta, and Saskatchewan, as a result of the commodity-fuelled economic growth in the West.
National housing starts, however, are expected to ease to just below 215,000 units this year and 194,000 units in 2009. This represents a 15% drop, after eight years of steady increases. The drop in single-unit starts is expected to be greater than for multiples, reflecting the number of empty nesters looking to downsize and the affordability of these properties for first-time buyers.
Mortgage rates to drop:
Mortgage rates will also see a drop this year as the lowered Bank of Canada interest rate flows through to the mortgage market. Prime Rates dropped as of today by half a point and are currently sitting at 4.25%. This is good news for those of you who have Variable Rate Mortgages; this quarter point drop can have a significant impact on your monthly mortgage savings.
The Canadian Response:
The central bank describes this rate cut as its key policy interest rate, signaling its intentions to credit markets everywhere. Numerous studies have been released regarding Canada’s economic situation and there is no doubt that both the real estate and mortgage markets, while slowing, are not stalling, and the Bank of Canada’s Rate Cut exemplifies this.
Contact your Calgary and Southern Alberta Mortgage Specialists to learn more about financing options available to you. MBN Mortgage has a team dedicated to all your financing needs, http://www.mbnmortgage.com.
MBN Mortgage
*Merix Financial
October 9th, 2008 at 9:49 am
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