Canadian housing markets are likely to continue a moderate yet steady climb in 2011, according to a Royal LePage House Price Survey and Market Survey Forecast released on January 6. Sales activity is likely to be “skewed to the first half of the year,” as purchasers anticipate that home mortgage rates are likely to rise in the latter half of the year.
The report authors note that “(t)he low cost of borrowing stimulated the housing market in 2010, and (that) this trend is predicted to continue in the first half of 2011.” Survey results reportedly indicate a “widely held consumer belief that rates will rise in the latter part of 2011 (which) may prompt an increase in buying activity early in the year.”
In commenting on the survey results, Royal LePage Real Estate Services president and chief executive, Phil Soper, forecast further “price appreciation early in 2011 as some buyers complete transactions in advance of anticipated higher borrowing costs.” Highlighting the survey’s focus on consumer expectations going forward, Mr. Soper notes that, “Canadians realize that interest rates are unsustainably low and that homes will become effectively more expensive when mortgage rates return to normal levels.”
“2011 is expected to unfold much like 2010,” Mr. Soper added, “when close to 60 per cent of sales volume occurred in the first half of the year in anticipation of interest rate increases that never materialized.” With further interest rate hikes by the Bank of Canada seemingly on hold for the time being – emphasis on the time being – it seems likely that the best housing prices and interest rates on home mortgages may be obtained prior to the traditional late Spring sales season.
Bank of Canada rates crept upward during the first three quarters of 2010, before settling at a still low 1.0 percent at the end of the year. “Like many Canadians, Mr. Soper observed, “we anticipated an end to the ultra-low interest rate era before year-end 2010.” Yet, paradoxically, while bank borrowing rates edged upwards over the balance of 2010, “global economic weakness, particularly in the United States, allowed policy makers and financial institutions to keep borrowing costs low, resulting in a stronger Canadian housing market and a better than forecast fourth quarter.”
Overall, the Royal Lepage survey results forecasting further steady but moderate home price increases is good news for Canadian mortgage and housing markets that are taking up the somewhat diminished demand caused by a full decade of double digit price increases.
