December 23, 2010
Anyone who tells you that they know what to expect next year in the real estate market has a chance of being right. Anything can happen — there are so many things beyond anyone’s control.
It’s true that the old adage, “safe as houses,” has been under stress in some of North America, of late.
Yet there are some things happening in the Canadian economy that indicate it should be a good year for the real estate market here in 2011.
Here are five reasons why, in Greater Toronto, a home may still be a good investment.
Interest rates at historic lows. All indicators from the Bank of Canada point to rates staying low until at least the middle of 2011. If, as expected, inflation also remains low, then there is a very good chance that we will see low rates right to the end of 2011. This alone will continue to drive the real estate market higher.
Stable jobless rate. Unemployment remains at 8 per cent and is not forecast to go much higher. The Canadian manufacturing industry is working to cut costs in order to remain competitive, even with the dollar trading at almost par with the United States. Although there is a possibility that the United States may slip into a double dip recession, you would never know it here, as more and more U.S. chains are trying to expand into Canada.
Fewer mortgage defaults. There is still bad news coming out of the U.S. housing industry, with some numbers suggesting that over 20 per cent of owners in the U.S. still have properties that are “under water.” This means that they owe the bank more than their properties are worth.
This makes it likely home prices in the United States will likely continue to fall in 2011.
By contrast, in Canada, it is estimated that less than 1 per cent of all Canadian home owners face this problem. As such, there will be far fewer mortgage defaults in Canada in 2011, and this will contribute to the real estate prices remaining stable.
Less land for development. There is a growing shortage of land available for development in the GTA for new housing developments. I think this is partly caused by government policy protecting green belt areas, whether for conservation, environmental or other reasons. This has caused the price of available vacant land to rise, which will continue to drive up the cost of a new home. This will also cause re-sale prices to either remain stable or increase, as there will not be the same choice for buyers out there who want to enter the housing market.
Record immigration. Immigration to Canada will continue at record levels, as people from all over the world recognize that the quality of life in Canada is second to none. Immigrants need a place to live and this will continue to fuel the demand for homes.
All of the above points to a very positive 2011 Canadian Real Estate market. Still, just to protect myself, I will write another column saying that the market should decline next year. That way, I can’t go wrong. Enjoy 2011.
Real estate lawyer Mark Weisleder is the author of Put the Pen Down! What homebuyers and sellers need to know before signing on the dotted line.