Charting Canada's Decade-long Housing Trend

The U.S. housing market may be suffering, but Canada’s real estate market is still flourishing. Its present housing boom is the strongest in Canada’s history and has been going on for 10 years. Signs across the rest of the country have indicated that the trend is not spiraling downward anytime soon.

How Canada Has Lasted A Decade-Long Housing Trend

According to Scotiabank chief economist Adrienne Warren, average inflation-adjusted home prices have gone up from 1998 to 2007 by 65 percent.

The Conference Board of Canada issued a report saying housing prices have been rising at a steady rate for the last 15 years. Some markets are starting to see a reduction in prices after years of high housing prices. Even if affordability is becoming a factor, there is low unemployment, low vacancy rates in apartments and high immigration.

Additionally, the Canada Mortgage and Housing Corp. expect housing prices to grow 5.2 percent this year, which levels off from last year’s 10.6 percent growth. Nonetheless, the growth is significant and a good sign of a healthy market.

U.S. Recession Could Hurt Canada’s Housing Trend

The recession in the U.S. poses some risk of hurting the Canadian housing trend. Weakening economic growth would especially affect Central Canada, as well as impact real estate activity to some degree.

While the housing market in the U.S. brought down the price of lumber, which means cheaper construction, energy and mineral prices have gone up significantly. Hence, the costs of building materials are starting to take their toll on the housing industry.

What To Expect From Canada’s Housing Market

After a decade-long run of increasing housing prices and slower economic growth overall, the market is expected to start slowing down.

The demand for new homes is beginning to shrink at the same time house affordability is decreasing. Multi-family homes, as opposed to single-family homes, will do better since renovation will start surpassing new housing construction. Renovations tend to lag behind housing growth by a year or so.

Unlike the U.S. housing crisis, Canada has stricter lending guidelines coupled with less investing and a more carefully planned approach to home buying. There certainly have been fewer sub-prime mortgages, which means that a housing bubble like the U.S. is not very likely to occur. Overall, Canada’s housing market will eventually start to slow down, but will hold steady due to job growth and housing supply.