Scotiabank predicts strong market for 2005.
November 15, 2004 - Canada's housing market will likely cool to more sustainable levels in 2005 after hitting all time sales records in all regions of the 
country this year, according to the latest Real Estate Trends released by Scotia Economics.
"The strength in housing activity in recent years has not been isolated to one or two major centres, or even to large urban cities. Rather, it would appear that households across Canada have essentially responded to low mortgage rates and good affordability, as well as to relatively less attractive investment alternatives," says Adrienne Warren, Senior Economist with Scotia Economics.
Warren says rising new listings and slower sales growth point to better-balanced market conditions, which will tend to dampen price gains. At the same time, however, the geographical diversity of the current housing market boom is not indicative of a seriously overheated market or overly speculative investor activity, suggesting the odds of a major correction are low.
Multiple Listing Service® (MLS®) resale home prices in Canada's 25 largest markets have risen at a 10 per cent annual rate over the past three years – increasing the average selling price from $182,000 in the first three quarters of 2001 to $242,000 this year. The majority of these markets have reported yearly price increases in a fairly narrow five to 10 per cent range. In only six centres – Quebec City, Montreal, Hull, Ottawa, Edmonton and Victoria – have prices increased more than 10 per cent annually, while no major centre has experienced declining prices.
"The strength of the housing market, however, extends well beyond these major city centres," says Warren. "Average price increases in the nation's smaller urban centres and rural towns have not been far behind at 9 per cent annually from 2001-2004, lifting the typical selling price from $143,000 to $186,000. The vast majority of these 80-plus smaller markets have seen yearly price gains in the same five to 10 per cent range as for the largest cities."
Housing market gains have also been regionally diverse, particularly when compared to the late-1980s housing boom. From 2001-2004, average annual price increases on a provincial basis have been fairly tightly centred on the 9.5 per cent national gain. In contrast, the 16 per cent yearly rise in national housing prices from 1986-1989 was driven mainly by an unsustainable 21 per cent annual increase in Ontario. Home price appreciation in B.C. was also exceptional at 15 per cent annually over this period.© Copyright 2004 The Canadian Real Estate Association