Canada showed a good housing market performance last year landing the 2nd spot next to Australia, Toronto-based Scotiabank, an international financial organization that dates back to 1671.
Canada had one of the better performing housing markets among advanced nations in 2010, though also one of the most volatile.
An unusually active winter and spring, prompted by pent-up demand, expectations of rising interest rates that only partially materialized, the looming transition to a Harmonized Sales Tax (HST) in Ontario and British Columbia, and pending changes in lending qualifying criteria, gave way to an unusually soft summer.
Over the fall, sales have returned to a more typical, sustainable level, according to the report.
“We are neither overtly optimistic nor pessimistic regarding the outlook for 2011,” stated Warren.
“On the one hand, we expect interest rates to remain at historically low levels, with the Bank of Canada deferring any further rate hikes to late 2011 given an uncertain global economic outlook and subdued inflation, and longer-term borrowing costs drifting up only modestly.
“This is an extremely powerful inducement for both first-time and move-up buyers and should maintain a decent level of sales.”
Yet, demand will likely be tempered by more moderate employment and income growth as government restraint efforts take hold, Warren states.
Public sector hiring has accounted for fully a third of the net new jobs created in Canada over the past year, a pattern not likely to be repeated next year.
“Overall, we anticipate a fairly lackluster year for residential housing, with modestly higher sales volumes and flat inflation-adjusted prices,” says Warren.
“The bigger risk likely awaits 2012 when more significant interest rate increases, combined with record high home prices, will notably strain affordability.”
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