By Diana Hill, Online Trading Academy Real Estate Investor Instructor
Most of my articles to date have focused mainly on real estate in the US. However, we have centers and students around the globe. A couple of months back I focused an article on the Dubai real estate market. Now, as we get ready for the Winter Olympics, I feel it is only fitting to focus on the Canadian real estate market.
Since the Olympics begin this week, let's first address an age old question: Do hosting the Olympic Games promote an increase in local housing prices, and is there a correlating crash in prices after the games are over?
A study conducted by authors Tsur Somerville and Jake Wetzel of the Center for Urban Economics and Real Estate at the Saunder School of Business looked at housing markets before, during and after a city held the Olympic Games to see if there was any evidence of an "Olympic Bounce" in housing prices. The study analyzed housing prices in Los Angeles (1984 Summer Olympics), Atlanta (1996 Summer Olympics), Sydney (2000 Summer Olympics), Calgary (1988 Winter Olympics), Salt Lake City (2002 Winter Olympics), and now Vancouver (2010 Winter Olympics). Each of the cities was compared to a similar city that did not host the games.
"There is no consistent evidence that hosting the Olympic Games results in either higher or lower housing prices and, as well, there was no pattern for an effect during the announcement of the city, the lead up to the games, or the period following," says the study. "More than anything else, our findings argue that hosting the Olympic Games is not about economic benefit. Instead, the focus in hosting the games should be an opportunity to celebrate excellence and achievement and to capture our collective imaginations," the study continues.
So what is the current status of the Canadian housing market? Some economists think that the Canadian market is a bubble that faces a downside into next year; the overall statistics, however, don't indicate that yet.
The Teranet's Measure of the Canadian Housing Prices (the closest equivalent to the Case Shiller Index) was off only 0.1% of its all-time record high in November 2009. Canadian housing prices did go down like most countries, but they didn't stay there long. Housing prices have increased 92% nationwide since 2000, out-performing most other asset classes.
Let's look at a couple of individual markets:
Vancouver
- The most unaffordable of the 28 housing markets in Canada
- The median home price is $540,900
- Sales volume up 172.2% for 2009
- Prices increased 16.2% for 2009
- Inventory is down over the last 8 months, a decrease of 41%
- An "A" rating was given to Vancouver in attracting newcomers to the city (as reported in a study by the Conference Board of Canada)
Source: REBGV (Real Estate Board Greater Vancouver)
Toronto
- The median home price is $350,000
- Sales volume up 87% for 2009
- Prices increased 19% for 2009
- Inventory is down over 41%
- A "B" rating was given to Toronto in attracting newcomers to the city
Source: TREB (Toronto Real Estate Board)
The Future
As Canada looks ahead to the next twenty-five years, it sees its population growth slowing down; with the Canadian population aging and fewer households being formed, the country's housing industry is counting on immigrant population to pick up the slack.
"Net international migration accounted for close to two-thirds of population growth in 2006. The ongoing shift in Canada's age structure, coupled with the widely held view that this demographic transition could spur a shortage of skilled workers, will likely ensure that immigration remains the biggest source of population growth over the coming decades," says the CMHC (Canada Mortgage and Housing Corp.)
The CMHC projects that 69.8% of households will be homeowners by the end of 2011 (up 1.5% in the last five years) and they see that percentage increasing to 73.5% by 2036.
So what does this all mean? There are two sides that point to Canada's market being solid:
- Mortgage arrears are at a low level, which suggests financial institutions have been prudent in their lending practices
- Canada's overall economic fundamentals remain healthy
But there is reason to be concerned because Canada's real estate prices have essentially doubled in five years; however, over that period, household incomes have stayed essentially flat - meaning affordability is a concern.
So invest with your eye on the future.
Great Fortune!
- Diana Hill
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