Forget the negativity and doomsday reports, Canadian consumers have never been so confident about the market…apart from one economist.
Everything is bright and beautiful in real estate. Or so believes many people, according to the latest Bloomberg Nanos Canadian Confidence Index.
Confidence in the market remains near the four-year high as many brush off forecasts of a market slowdown from some analysts.
“Overall confidence remained near a high for 2014 largely on continued positive views on the value of real estate,” says Nik Nanos, chairman of Ottawa-based Nanos Research Group.
However, one economist is also quick to play down any real enthusiasm in the market.
“True, real home prices have had a terrific run for more than a decade. But, that followed an equally long period of fallow. For example, after-inflation national average home prices have risen 76.7 per cent since the first quarter of 2002, an annualized increase of just under five per cent,” Douglas Porter, chief economist writes in BMO’s latest weekly report. “However, in the period from 1990 up until 2002 Q1, real home prices had actually declined 6.4 per cent —that is, real home prices made zero headway for more than a decade, arguably laying the groundwork for a lengthy run.”
When combining the two periods, Porter points to moderate 2.1 per cent price growth since 1990.
“Toronto home prices have run a bit hotter in recent years, partly due to provincially mandated land constraints,” Porter states. “But even GTA real gains have been unremarkable, especially when compared against the incredible boom of the late 1980s and the incredible bust of the early 1990s.”
To further his argument, Porter draws parallels between Canada’s hottest markets and comparable markets around the world.
"Yes, Vancouver is one of the priciest cities in the world, but it shares many of the same attributes as like-priced cities (Sydney, Hong Kong and San Francisco)," Porter writes. "Further down the scale, prices in Toronto=New York, Calgary=Washington, and Montreal=Chicago, none of which seems wildly out of line (although we won’t deploy the “similar attributes” reasoning with these city pairs)."
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