A report from Canada’s third-largest bank hints a slowdown in the countries housing market. The report, that was released Monday, said the slowdown will continue for the rest of the year and might follow us for years to come. The report, released by Scotiabank, also states that no crash is likely since demographic trends support the medium term.
The report went on by sharing that home sales dropped more than 10% from last spring, with prices leveling off but not yet falling except in hard-hit markets.
Even with the slump, Canada’s dramatic drop isn’t as bad as it is in the United States. Scoitabank senior economist Adrianne Warren expects prices to decline around 5% but that will likely be over the next couple of years rather than happening quickly. Due to demographics, including rapid immigration and baby boomers wanting to keep their homes, she says will support housing demand.
“Contrary to some dire predictions, population aging will not fuel a demographically induced sell-off in Canadian real estate. However, an aging population does point to a lower level of housing turnover, sales and listings,” Warren shared in the report, Scotiabanks’s annual real estate outlook.
The report goes on to point out that seniors are healthier, wealthier and living longer than previous generations and are attached to their homes, which is making them not likely to sell in a down market.
Warren looks at immigration also as a factor. It adds some 250,000-300,000 people to our countries population, yearly and will continue to be the dominant source of new household formation. Typically, immigrants look to rent at first arrival, however, it’s been proven that they look for home ownership after five years and their rates of owning a home is around the 70% rate of native-born Canadians after 10 years.
This will support house prices in big markets, Warren points out. This will help put a floor under the market locally and in Vancouver, which had the hottest market before the slowdown.
“Relative to their Canadian-born counterparts, immigrant households are more likely to reside in large and mid-sized urban centers, which could fuel relatively stronger housing demand and prices in those areas,” Warren said.
Source: Financial Post
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